Investment Company Act of 1940 — Section 15(a)
Nuveen Fund Advisors, LLC
June 20, 2017
Response of the Chief Counsel's Office
Division of Investment Management
Your letter dated June 19, 2017 requests our assurance that we would not recommend enforcement action to the Commission against NWQ Investment Management Company, LLC (“NWQ”) under Section 15(a) of the Investment Company Act of 1940 (the “1940 Act”) if, under the circumstances described in your letter, NWQ continued to serve as investment adviser to certain series of the Nuveen Investment Trust and Nuveen Investment Trust II (the “Trusts”) pursuant to written investment sub-advisory agreements that were not approved by the vote of a majority of the outstanding voting securities of such series.
You state the following:
- Nuveen Tradewinds Value Opportunities Fund and Nuveen Tradewinds Global All-Cap Fund (the “Funds”) are series of the Trusts. The Trusts are registered with the Commission as open-end management investment companies. Nuveen Fund Advisors, LLC (“Nuveen Fund Advisors”) serves as investment adviser to the Funds. Prior to August 1, 2016, Tradewinds Global Investors, LLC (“Tradewinds”) served as sub-adviser to the Funds. Nuveen Investments, Inc. (“Nuveen”) owns a controlling interest in Nuveen Fund Advisors, Tradewinds, and NWQ.
- In May 2016, Nuveen decided to wind up operations at Tradewinds due in large part to significant asset outflows that commenced following the departure of Tradewinds’ President and Chief Investment Officer and persisted thereafter. As part of a transition plan, at an in-person meeting held in the same month, the Trusts’ Board of Trustees (the “Board”) approved the termination of each Fund’s sub-advisory agreement with Tradewinds, effective as of August 1, 2016. As of the same date, the Board also appointed NWQ as sub-adviser to the Funds, pursuant to interim investment sub-advisory agreements (each, an “Interim Sub-Advisory Agreement”) as permitted by Rule 15a-4 under the 1940 Act. Each Interim Sub-Advisory Agreement was scheduled to terminate no later than December 29, 2016 (the “Expiration Date”), thus providing for the longest interim period permitted under the rule.
- Also at the May 2016 meeting, the Board considered various long-term alternatives, including liquidation of the Funds, and determined that the Funds’ reorganization into Nuveen NWQ Global Equity Income Fund (each, a “Reorganization”) was in the best interests of each Fund. In the event a Fund’s Reorganization was not approved by shareholders and consummated prior to the Expiration Date, the Board also approved the longer-term appointment of NWQ as the sub-adviser to each Fund pursuant to a new sub-advisory agreement (each, a “New Sub-Advisory Agreement”).
- With a joint proxy statement/prospectus dated September 23, 2016, each Fund solicited shareholders to approve (1) its Reorganization and (2) the New Sub-Advisory Agreement (each, a “Proposal”). After the joint proxy statement/prospectus was mailed, Nuveen Fund Advisors and the Funds actively solicited votes through direct mailings and the use of an experienced and well-respected proxy solicitor in an effort to achieve a quorum for each Fund.
- As of November 8, 2016, an overwhelming majority of the votes received by the Funds’ shareholders were cast in favor of both Proposals. Nuveen Fund Advisors, however, believed that, despite all the efforts made, there was a high probability that neither Fund would receive the number of votes necessary to reach a quorum by the Expiration Date.
Accordingly, as of November 29, 2016, you requested assurance that we would not recommend enforcement action against NWQ under Section 15(a) of the 1940 Act if NWQ continued to serve as sub-adviser to the Funds for the Additional Period (as described below) pursuant to written investment sub-advisory agreements that had not been approved by the vote of a majority of the outstanding voting securities of the Funds.
Section 15(a) of the 1940 Act states, in relevant part, that it shall be unlawful for a person to serve as an investment adviser of a registered investment company, except pursuant to a written contract that, among other things, has been approved by the vote of a majority of the outstanding voting securities of such registered investment company. Section 15(a) was adopted to give fund shareholders a voice in approving fund investment advisory contracts and to prevent trafficking in fund advisory contracts.
Rule 15a-4 under the 1940 Act provides a temporary exemption from the shareholder approval requirement in Section 15(a) where, among other circumstances, the registered investment company’s board of directors has terminated the previous advisory contract. The rule permits a person to act as an investment adviser to a registered investment company under an interim advisory agreement without the required shareholder approval for a period no greater than 150 days following the date on which the previous contract terminated subject to the requirements set forth in the rule. Rule 15a-4 was designed to prevent registered investment companies from being harmed by losing investment advisory services before shareholders can approve a new investment advisory contract.
You proposed to have NWQ continue to serve as investment sub-adviser to each Fund for an additional period of time following the interim period allowed by Rule 15a-4, but not to exceed the earliest of: (i) the consummation of the Reorganization; (ii) shareholder approval of the Fund’s New Sub-Advisory Agreement; or (iii) 60 days after the Expiration Date (the “Additional Period”).
Nuveen Fund Advisors and the Trusts believed that extending the term of the Interim Sub-Advisory Agreements was in the best interests of the Funds, and the Board approved such extension. Without such an extension, you argue that it may have been necessary to liquidate the Funds.
As conditions to the requested relief, the Funds and Nuveen Fund Advisors agreed to the following during the Additional Period:
- Nuveen Fund Advisors and the Funds, with the assistance of their proxy solicitor, would continue their proxy solicitation efforts to seek to reach a quorum. Nuveen Fund Advisors would bear all postage, printing, tabulation and proxy solicitation costs during the Additional Period.
- Nuveen Fund Advisors would waive the portion of each Fund’s investment advisory fee in an amount equal to the amount of the sub-advisory fee that would have been payable by Nuveen Fund Advisors to NWQ under the original terms of the Interim Sub-Advisory Agreement.
- Other than changes to reflect the relief granted, the terms and conditions of the Interim Sub-Advisory Agreements would remain the same.
On the basis of the facts and representations set forth in your letter, we would not recommend enforcement action to the Commission against NWQ under Section 15(a) of the 1940 Act for continuing to serve as investment adviser to each Fund for the Additional Period pursuant to written investment sub-advisory agreements that were not approved by the vote of a majority of the outstanding voting securities of the Fund.
This response expresses our views on enforcement action only and does not express any legal conclusions on the questions presented. Because our position is based on the facts and representations in your letter, you should note that any different facts or representations may require a different conclusion.
 This letter confirms oral no-action relief that the staff provided to Deborah Bielicke Eades, Esq., of VedderPrice P.C. on November 29, 2016.
 Nuveen Fund Advisors’ investment advisory agreements with the Funds comply in all respects with Section 15(a) of the 1940 Act, including having been approved by a vote of a majority of the Funds’ outstanding voting securities.
 Nuveen Fund Advisors and NWQ serve as the investment adviser and investment sub-adviser, respectively, of Nuveen NWQ Global Equity Income Fund.
 In particular, you state that several factors likely contributed to the failure to reach a quorum, including: (1) the level of redemptions since the record date for the shareholder meeting; (2) a higher than typical percentage of each Fund’s shares represented by objecting beneficial owners as of the record date; and (3) each Fund’s shareholder base was more dispersed than is typical.
 Section 15(a) applies to investment advisers as defined in Section 2(a)(20)(A) and (B) of the 1940 Act, which includes both primary advisers and sub-advisers.
 See Hearings on S. 3580 Before the Subcomm. of the Senate Comm. on Banking and Currency, 76th Cong., 3d. Sess. 253 (1940) (statement of David Schenker). See also Temporary Exemption for Certain Investment Advisers, Investment Company Act Release No. 24177 at n.4 (Nov. 29, 1999) (“Adopting Release”).
 See Adopting Release at n.6 and accompanying text.
 At a shareholder meeting held on December 29, 2016, Nuveen Tradewinds Global All-Cap Fund achieved a quorum and shareholders approved the New Sub-Advisory Agreement. At a shareholder meeting held on January 26, 2017, Nuveen Tradewinds Value Opportunities Fund achieved a quorum and shareholders approved the New Sub-Advisory Agreement.
 You represent that Nuveen Fund Advisors does not have the requisite infrastructure in place to manage the Funds’ portfolios directly, and it would have been impracticable to establish such infrastructure prior to the Expiration Date.
The Incoming Letter is in Acrobat format.