Stradley Ronon Webinar, Resources Highlight Dual Share Class Developments

Stradley Ronon recently hosted a webinar that walked through recent developments in dual share class relief after Dimensional Funds, the first to file an application for dual share class exemptive relief, had productive conversations with the SEC staff. The program highlights amendments to the Dimensional application including a more detailed outline of board responsibilities both in the initial stages and after the new class has been launched.

Dimensional’s amended application would require the adviser to produce for the board an “Initial Advisor Report” that outlines reasonably expected costs and benefits to each class. The report may touch on potential cost savings through economies of scale and in-kind transactions, portfolio transaction costs, cash drag on performance, tax consequences, and other cross subsidization issues. The report would set forth numerical targets that would be tracked in subsequent reports. If the target levels/goals are breached, the adviser would report this breach to the board within 30 days, and the board would need to determine whether remediation is necessary. Fund boards will also receive an annual “Ongoing Advisor Report” to the board which would describe any material changes to benefit and cost targets, further results of the ongoing monitoring process and any recommended changes, as well as a description of any conflicts of interest.

Since Dimensional filed its amended application, several other complexes have amended their filings to align with Dimensional’s changes. The Commission still needs to review these amendments (as well as any additional comments or requirements) and grant relief before any dual share class application is effective. The SEC could potentially grant relief in the next few months. 

Click here to watch an archived webinar on amendments to dual share class applications.
Click here to view the Stradley report on the applications for dual-share class relief.