SEC Staff Withdraws Prior Guidance and Provides New No-Action Position Allowing Closed-End Funds to Opt in to State Control Share Statutes
The staff (the “Staff”) of the Division of Investment Management (the “Division”) at the U.S. Securities and Exchange Commission (the “Commission”) has issued a long-awaited statement (the “Statement”) addressing the interaction between state control share acquisition statutes (each, a “control share statute”) and Section 18(i) of the Investment Company Act of 1940 (the “1940 Act”), which requires that every share of closed-end fund stock be a voting stock and have equal voting rights with every other share of outstanding voting stock. In the Statement, the Staff withdrew a prior interpretive letter (the “Boulder Letter”) that expressed a view that use of a control share statute by a closed-end fund would be inconsistent with Section 18(i). Most significantly, the Staff also established a new no-action position that closed-end funds can rely upon to opt in to and trigger a control share statute notwithstanding Section 18(i).