(Article from Registered Funds Regulatory Update, April 2026)
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On February 18, 2026, the SEC Staff issued a series of updated FAQs related to the adoption of amendments in 2023 to Rule 35d-1 under the 1940 Act, the so-called “Names Rule.” The updated FAQs address interpretive issues, including certain broad categories of investment company names that are likely to mislead investors about an investment company’s investments and risks. The Staff had previously issued FAQs regarding the Names Rule amendments in January 2025. The updated FAQs are primarily intended to provide further interpretive clarity on the scope and application of the amended Names Rule in response to industry requests.
Notably, the updated Names Rule FAQs, among other things:
(i) confirm that a fund generally does not need to obtain shareholder approval if it wishes to adopt or revise a fundamental 80% investment policy to comply with the amended Names Rule, unless the revisions constitute a deviation from the existing policy or some other existing fundamental policy;
(ii) confirm that a fund generally does not need to provide 60 days’ prior shareholder notice when making non-material changes to an existing non-fundamental 80% investment policy solely to comply with the amended rule, or when amending the policy to make it more stringent in accordance with the amended rule;
(iii) confirm that a fund generally may count assets intended to support its unfunded commitments in “private funds or special purpose vehicles that own or will own one or more private assets” (“portfolio funds”) towards its 80% investment policy (i.e., cash and cash equivalents maintained to cover unfunded commitments to invest equity in portfolio funds that are, or will be, included in the fund’s 80% basket and that the fund reasonably expects will be called in the future, provided that appropriate disclosure is included in the fund’s registration statement);
(iv) confirm that single-state tax-exempt funds are generally required to satisfy the 80% investment requirement only with respect to securities of issuers located in the named state;
(v) confirm that funds with the terms “municipal” and “municipal bond” in their names are treated like tax-exempt funds; however, funds that use the term “municipal” rather than “tax-exempt” may count securities that generate income subject to the alternative minimum tax toward the 80% investment requirement, while funds that use the term “tax-exempt” may not; and
(vi) clarify whether specific terms commonly used in fund names must adopt a 80% investment policy, including: “Income” (where “income” does not refer to “fixed income” securities, on its own, generally, no), “High-Yield” (generally, yes), “Tax-Sensitive” (generally, no), “Money Market” (if the name suggests a type of money market instrument, yes), “Growth” or “Value” (generally, yes, subject to certain limited exceptions), and “Merger” or “Merger Arbitrage” (generally, no).
Staff Guidance, SEC Division of Investment Management, 2025–26 Names Rule FAQs
(last updated Feb 19, 2026), available at: https://www.sec.gov/rules-regulations/staff-guidance/division-investment-management-frequently-asked-questions/2025-26-names-rule-faqs.