On August 4, 2026, the Securities and Exchange Commission adopted technical amendments to Rule 0-1(a)(7) under the Investment Company Act of 1940. The amendments, which became effective on August 6, 2026, conform the rule to a federal court decision that vacated certain fund governance requirements originally adopted by the Commission in 2004. As a result, registered investment companies and business development companies (BDCs) now have renewed regulatory clarity regarding the applicable board composition standard.
The technical amendments remove references to the vacated 2004 provisions and reinstate the prior standard requiring that a majority of a fund's directors be disinterested directors. By restoring the pre-2004 framework, the Commission has aligned the text of Rule 0-1(a)(7) with the governance regime that has effectively controlled since the court's decision. Although the amendments are described as technical in nature, they carry practical significance for funds that have been operating under uncertainty regarding the current state of the rule.
For fund boards, the amended rule confirms that the disinterested-director majority requirement remains the governing standard, rather than the heightened supermajority framework that had been contemplated under the 2004 provisions. This restored clarity affords boards a more stable foundation for evaluating board composition, committee structures, nomination procedures, and related governance protocols. It also reduces the risk of inconsistency between formal rule text and prevailing practice.
Registered investment companies and BDCs, together with their compliance officers and legal counsel, should review existing governance policies to confirm alignment with the reinstated standard. This review may include board composition assessments, director independence determinations, and evaluation of applicable committee charters. Funds should also revisit related disclosures in registration statements, shareholder communications, and periodic filings to ensure they accurately reflect the current rule text and the disinterested-director majority requirement.
Because the amendments are effective immediately, prompt attention is warranted to identify any references to the vacated provisions that may still appear in internal policies, procedures, or external disclosures. Fund complexes may also wish to document their compliance analysis in support of ongoing board oversight and regulatory examinations.
This update is provided for general informational purposes only and does not constitute legal advice. Clients should consult qualified counsel for guidance tailored to their specific circumstances.