Other
The BNY Mellon Family of Funds, et al.
July 9, 2019
Investment Company Act of 1940 – Section 15(a)
Certain Disclosure Requirements
July 9, 2019
The BNY Mellon Family of Funds
BNY Mellon Funds Trust
and
BNY Mellon Investment Adviser, Inc.
Chief Counsel’s Office
Division of Investment Management
Your letter dated July 9, 2019 requests our assurance that we would not recommend enforcement action to the Securities and Exchange Commission (“Commission”) under section 15(a) of the Investment Company Act of 1940 (“Act”) and certain disclosure requirements[1] if: (i) subadvisers to certain registered open-end investment companies (“funds”), including subadvisers that are affiliated persons, as defined in section 2(a)(3) of the Act, of the funds or the funds’ primary investment adviser (“Affiliated Subadvisers”), serve under subadvisory agreements that have not been approved by the funds’ shareholders (“Subadviser Voting Relief”); and (ii) the funds disclose the advisory fees paid to the subadvisers on an aggregate, rather than individual, basis (“Aggregate Fee Disclosure Relief,” and together with Subadviser Voting Relief, “Multi-Manager Relief”). You state that the purpose of your request is to extend the funds’ existing exemptive relief under section 15(a) and the disclosure requirements to Affiliated Subadvisers.[2]
The Commission recently issued an order under section 6(c) of the Act granting Multi-Manager Relief with respect to Affiliated Subadvisers.[3] The Carillon Order, in essence, extended the Multi-Manager Relief that the Commission has been granting since 1995 to any Affiliated Subadviser, subject to the terms and conditions set forth in the application for the Carillon Order (such conditions, “2019 Multi-Manager Relief Conditions”). We agree that the position you are requesting from us is appropriate to provide additional flexibility to funds and investment advisers operating under a Prior Multi-Manager Order without having to seek amendments to their orders.
Accordingly, we would not recommend enforcement action to the Commission under section 15(a) of the Act and the disclosure requirements[4] against a person covered by a Prior Multi-Manager Order if a fund relies on its Prior Multi-Manager Order with respect to any subadviser, provided the fund complies with the 2019 Multi-Manager Relief Conditions in their entirety.[5] The statements in this letter represent the views of the Division of Investment Management. This letter is not a rule, regulation or statement of the Commission, and the Commission has neither approved nor disapproved its content.
Jessica Shin
Attorney-Adviser
[1] These disclosure requirements include Item 19(a)(3) of Form N-1A, Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8), and 22(c)(9) of Schedule 14A under the Securities Exchange Act of 1934, and sections 6-07(2)(a), (b), and (c) of Regulation S-X.
[2] See The Dreyfus Corporation, et al., Investment Company Act Release Nos. 30580 (June 26, 2013) (notice) and 30608 (July 23, 2013) (order) (“Dreyfus Order”).
[3] See Carillon Tower Advisers, Inc., et al., Investment Company Act Release Nos. 33464 (May 2, 2019) (notice) and 33494 (May 29, 2019) (order) (“Carillon Order”). Prior to the Carillon Order, Commission orders granting Multi-Manager Relief (including the Dreyfus Order) extended only to subadvisers that were not Affiliated Subadvisers or were wholly-owned subsidiaries of the fund’s primary adviser (“Prior Multi-Manager Orders”).
[4] The Prior Multi-Manager Orders also included relief from rule 18f-2 under the Act. Because the Commission had determined that relief from rule 18f-2 was unnecessary due to the fact that the Subadviser Voting Relief granted an exemption from section 15(a) of the Act, the Carillon Order did not include relief from rule 18f-2. See Exemption from Shareholder Approval for Certain Subadvisory Contracts, Investment Company Act Release No. 26230, at n. 11 (Oct. 23, 2003).
[5] We would not expect a fund or investment adviser that relies on this position to comply with the conditions of their Prior Multi-Manager Order. A fund that wishes to rely on its Prior Multi-Manager Order with respect to an Affiliated Subadviser not covered by the Prior Multi-Manager Order, must comply with the 2019 Multi-Manager Conditions, including obtaining shareholder approval to operate as a fund using Multi-Manager Relief for Affiliated Subadvisers, with respect to any existing or future subadviser going forward. A fund that wishes to rely on its Prior Multi-Manager Order solely with respect to the type(s) of subadvisers covered by the Prior Multi-Manager Order, may choose to comply with the 2019 Multi-Manager Conditions, in their entirety, instead of the conditions in its Prior Multi-Manager Order, provided the fund does so with respect to all existing and future subadvisers going forward. If a fund’s Prior Multi-Manager Order provides only Subadviser Voting Relief, our no-enforcement position extends only to that relief.