NYSE Proposes Rule Changes to Exempt Registered Closed-End Funds from Annual Meeting Requirement

On June 6, the New York Stock Exchange (NYSE) filed an application under the Securities Exchange Act of 1934 (Rule 19b-4) to amend Section 302.00 of the NYSE Listed Company Manual which requires closed-end management investment companies (CEFs) listed for trading on NYSE to hold an annual shareholder meeting during each fiscal year. While the Investment Company Act of 1940 does require shareholder approval of various issues, an annual meeting is not a requirement. In its application, NYSE noted that due to “significant statutory protections under the 1940 Act provided to shareholders of CEFs, for which there are no parallel legal protections for the shareholders of public operating companies,” NYSE believes it is appropriate to exempt CEFs from the annual shareholder meeting requirement. Exempting CEFs from the annual shareholder meeting requirement may help alleviate the pressure these funds are receiving from activist hedge funds and investors that use the annual meeting requirement as a pathway to have directors aligned with their views elected. Under the Exchange Act, the Commission has 180 days to issue an order either approving or disapproving the proposed change.

Click here to read a client alert from Ropes & Gray covering the NYSE application.