Funds Talk: April 2019

Topics covered in this issue include: 

• SEC Proposes Streamlining Offering Rules for Closed-End Funds and BDCs While Also Proposing New Reporting Obligations
  In March 2019, the SEC, at the direction of Congress, proposed rules to modify the registration, communications, and offering processes for business development companies and registered closed-end funds, including interval funds under the Securities Act of 1933. This article summarizes the key elements of the proposals. 
  
  

• Litigation Financing Agreements Affirmed by NY Appellate Court
  A New York appellate court has upheld a decision granting summary judgment in favor of a litigation funder. The court found the litigation financing agreement to be enforceable, rejecting defendant’s claims of usury and unconscionability.
  
  
• Staff Issues No-action Letter Regarding In-person Voting Requirements for Registered Investment Company
  The letter provides relief from requirements for in-person voting for a registered investment firm, provided certain conditions are met. The move is intended to promote efficiency while taking into account advances in communication technology. However, firms should consider the circumstances before implementing such relief.
  
  
• Renewed Spotlight on Rule 10b5-1 Insider Trading Plans: Promoting Transparent Standards for Corporate Insiders Act
  On Jan. 28, 2019, the House of Representatives passed with overwhelming bipartisan support (413 to 3) the Promoting Transparent Standards for Corporate Insiders Act (H.R. 624) (the Act). If passed by the Senate, the Act would direct the SEC to carry out a study to determine whether reforms should be made to Rule 10b5-1 under the Securities Exchange Act of 1934 to prevent insiders from exploiting “loopholes” in the rule to profit from trades made using inside information. The Act is intended to address critics of Rule 10b5-1, who point to studies that claim insiders realize abnormal gains when trading in their company’s securities. If enacted, the Act could lead the SEC to make significant changes to the rule.