Fintech
SEC Updates Regulatory Framework for Fund of Funds Arrangements
Washington, D.C.–(Newsfile Corp. – October 7, 2020) – The Securities and Exchange Commission today voted to adopt a new rule and related amendments designed to put in place a comprehensive regulatory framework for fund of funds arrangements. The rule also reflects the Commission’s decades of experience with fund of funds arrangements and will create a consistent and efficient rules-based regime for the formation and oversight of funds of funds.
“Main Street investors have increasingly used mutual funds, exchange-traded funds (ETFs) and other types of funds to access our markets and invest for their future,” said SEC Chairman Jay Clayton. “To achieve asset allocation, diversification and other objectives, many funds have also invested in other funds. Today’s action will enhance and modernize the regulatory framework for these arrangements.”
“The framework adopted today will provide flexibility to fund managers to allocate and structure investments efficiently, without the costs and delays of seeking individualized exemptive orders, as long as the arrangements satisfy a number of conditions designed to enhance investor protection,” said Chairman Clayton. “I thank the Commission’s staff for their work in advancing this important framework.”
According to staff estimates, approximately 40% of all registered funds hold an investment in at least one other fund. Total net assets in mutual funds that invest primarily in other mutual funds have grown to $2.54 trillion in 2019. Retail investors similarly use fund of funds arrangements as a convenient way to allocate and diversify their portfolio through a single, professionally managed investment. Rule 12d1-4 will allow a fund to acquire the shares of another fund in excess of the limits of the Investment Company Act without obtaining an individual exemptive order from the Commission if the funds comply with conditions designed to enhance investor protection.
The Commission is also rescinding rule 12d1-2 as well as most exemptive relief permitting fund of funds arrangements because the rule will create a new, comprehensive exemptive rule on which funds of funds can rely. The Commission is not rescinding exemptive relief granted to funds of funds that is outside the scope of the rule.
***
FACT SHEET
Fund of Funds Rule
October 7, 2020
Action
The Commission is adopting a new rule and amendments under the Investment Company Act of 1940 designed to streamline and enhance the regulatory framework for funds that invest in other funds (“fund of funds” arrangements). The Commission also is rescinding rule 12d1-2 under the Act and most exemptive orders granting relief from sections 12(d)(1)(A), (B), (C), and (G) of the Act. Finally, the Commission is adopting related amendments to rule 12d1-1 under the Act and Form N-CEN. These modifications reflect the Commission’s decades of experience with fund of funds arrangements and will create a consistent and efficient rules-based regime for the formation and oversight of funds of funds.
Highlights of the Action
Rule 12d1-4
Rule 12d1-4 will permit a registered investment company or business development company or “BDC” (referred to as “acquiring funds”) to acquire the securities of any other registered investment company or BDC (referred to as “acquired funds”) in excess of the limits in section 12(d)(1) of the Investment Company Act of 1940. The rule will create a consistent framework for fund of funds arrangements to replace the existing approach, which depends on the Commission’s exemptive orders and varies based on an acquiring fund’s type. Open-end funds, unit investment trusts, closed-end funds (including BDCs), exchange-traded funds and exchange-traded managed funds will all be able to rely on rule 12d1-4 as both acquiring and acquired funds.
While the rule contains elements from the Commission’s current exemptive orders permitting fund of funds arrangements, it is tailored to enhance investor protections while providing funds with flexibility to meet their investment objectives in an efficient manner. The rule’s conditions include the following:
- Limits on Control and Voting. Rule 12d1-4 will prohibit an acquiring fund from controlling an acquired fund and will require an acquiring fund that holds more than a certain percentage of an acquired fund’s outstanding voting securities to vote those securities in a prescribed manner in order to minimize the influence that an acquiring fund may exercise over an acquired fund. An acquiring fund that is part of the same fund group as the acquired fund and an acquiring fund that has a sub-adviser that acts as adviser to the acquired fund will not be subject to the control and voting conditions.
- Required Evaluations and Findings. To address concerns that an acquiring fund could exert undue influence over an acquired fund or charge duplicative fees and expenses, the rule will require certain evaluations and findings be made before the acquiring fund invests in an acquired fund. These differ depending upon whether a fund is the acquiring or acquired fund and whether it is a management company, unit investment trust, or a separate account funding variable insurance contracts.
- Required Fund of Funds Investment Agreements. In addition, the rule will require funds that do not share the same investment adviser to enter into a fund of funds investment agreement memorializing the terms of the arrangement. This and the evaluation and finding requirements replace a proposed requirement that would have prohibited an acquiring fund that acquires more than 3% of an acquired fund’s outstanding shares from redeeming more than 3% of the acquired fund’s total outstanding shares in any 30-day period.
- Limits on Complex Structures. To limit funds’ ability to use fund of funds arrangements to create overly complex structures, rule 12d1-4 generally will prohibit funds from creating three-tier fund of funds structures, except in certain circumstances, including an exception that will permit an acquired fund to invest up to 10% of its total assets in other funds (including private funds) without restriction (the “10% bucket”). The 10% bucket will provide flexibility for fund of funds arrangements to evolve, while permitting certain structures that could benefit investors through greater efficiency.
Rescission of Rule 12d1-2 and Certain Exemptive Relief, and Amendments to Rule 12d1-1
To help create a consistent and streamlined regulatory framework for fund of funds arrangements, the Commission is also taking several related actions:
- Rescission of Rule 12d1-2 and Certain Exemptive Relief. The Commission is rescinding rule 12d1-2, which permits funds that primarily invest in funds within the same fund group to invest in unaffiliated funds and non-fund assets. The Commission also is rescinding the Commission’ exemptive orders permitting fund of funds arrangements, with limited exceptions. As a result, funds wishing to create certain types of fund of funds arrangements that exceed the statutory limitations will be required to rely on rule 12d1-4 and comply with its associated conditions.
- Amendments to Rule 12d1-1. The Commission is amending rule 12d1-1 to allow funds that primarily invest in funds within the same fund group to continue to invest in unaffiliated money market funds.
Amendments to Form N-CEN
The Commission is also amending Form N-CEN to require funds to report whether they relied on rule 12d1-4 or the statutory exception in section 12(d)(1)(G) of the Investment Company Act during the applicable reporting period.
What’s Next?
The rule will be effective 60 days after publication in the Federal Register, but, in order to facilitate a transition period, the compliance date for the amendments to Form N-CEN will be 425 days after publication in the Federal Register. Further, the rescission of rule 12d1-2 and the Commission’s exemptive orders will be effective one year from the effective date of the rule.
As we close out 2024, the fintech industry continues to deliver headlines that underscore its dynamism and innovation. From IPO aspirations to groundbreaking regulatory milestones, today’s updates highlight the transformative power of fintech partnerships, regulatory evolution, and disruptive technologies. Here’s what you need to know.
Chime’s Quiet Step Toward Public Markets
Chime, the U.S.-based financial technology startup best known for its digital banking services, has taken a significant step by filing confidential paperwork for an initial public offering (IPO). As one of the most valuable private fintechs in the U.S., Chime’s move could potentially signal a renewed appetite for fintech IPOs in a market that has been cautious following fluctuating valuations across the tech sector.
With a valuation that reportedly exceeded $25 billion in its last funding round, Chime’s IPO could set a new benchmark for the industry. Observers note that its strong customer base and revenue growth may make it an appealing choice for investors seeking to capitalize on the digital banking boom. However, the timing and success of the IPO will depend on broader market conditions and the regulatory landscape.
Source: Bloomberg
ZBD’s Pioneering Achievement: EU MiCA License Approval
ZBD, a fintech company specializing in Bitcoin Lightning network solutions, has made history by becoming the first to secure an EU MiCA (Markets in Crypto-Assets Regulation) license. This landmark approval by the Dutch regulator positions ZBD at the forefront of compliant crypto-fintech operations in Europe.
MiCA, which aims to harmonize the regulatory framework for crypto-assets across the EU, has been a focal point for industry players aiming to establish legitimacy and expand their offerings. ZBD’s achievement not only validates its operational rigor but also sets a precedent for other fintech firms navigating the evolving regulatory landscape.
Industry insiders view this as a strategic advantage for ZBD as it broadens its footprint in Europe. By leveraging its regulatory approval, the company can accelerate its product deployment and establish trust with institutional and retail users alike.
Source: Coindesk, PR Newswire
The Fintech-Credit Union Synergy: A Blueprint for Innovation
The convergence of fintechs and credit unions continues to reshape the financial services ecosystem. Collaborative initiatives, such as the one highlighted in the recent partnership between fintech innovators and credit unions, are proving to be a potent force in delivering tailored financial solutions.
This “dream team” approach allows credit unions to leverage fintech’s technological expertise while maintaining their community-focused ethos. Key areas of collaboration include digital payments, personalized financial management tools, and enhanced loan processing capabilities. These partnerships not only enhance member engagement but also enable credit unions to remain competitive in an increasingly digital-first financial environment.
Industry analysts emphasize that such collaborations underscore a broader trend of traditional financial institutions embracing fintech-driven solutions to bridge service gaps and foster innovation.
Source: PYMNTS
Tackling Student Loan Debt: A Fintech’s Mission
Student loan debt remains a pressing issue for millions of Americans, and a Rochester-based fintech aims to offer relief through its cloud-based platform. This innovative solution is designed to simplify loan management and provide borrowers with actionable insights to reduce their debt burden.
The platform’s features include repayment optimization tools, personalized financial education, and seamless integration with loan servicers. By addressing the complexities of student loan management, this fintech is empowering borrowers to make informed decisions and achieve financial stability.
As the student loan crisis continues to evolve, solutions like this highlight the critical role fintech can play in addressing systemic financial challenges while fostering financial literacy and inclusion.
Source: RBJ
Industry Implications and Takeaways
Today’s updates underscore several key themes shaping the fintech landscape:
- Regulatory Milestones: ZBD’s MiCA license approval exemplifies the importance of regulatory compliance in unlocking growth opportunities.
- Strategic Partnerships: The collaboration between fintechs and credit unions demonstrates the value of combining technological innovation with traditional financial models to drive customer-centric solutions.
- Market Opportunities: Chime’s IPO move reflects a potential revival in fintech public offerings, signaling confidence in the sector’s long-term prospects.
- Social Impact: Fintech’s ability to tackle systemic issues, such as student loan debt, showcases its role as a force for positive change.
The post Fintech Pulse: Your Daily Industry Brief (Chime, ZBD, MiCA) appeared first on News, Events, Advertising Options.
Leading global payments platform SPAYZ.io has confirmed it will be attending iFX EXPO Dubai 2025 on 14 to 16 January. Exhibiting at Stand 64 at Trade Centre Dubai, SPAYZ.io’s team of professionals will be on hand providing live demonstrations of its renowned payment services for payment providers. Attendees will also receive exclusive insight into SPAYZ.io’s plans for 2025 alongside early early access to its upcoming plans for the new year.
SPAYZ.io delivers a host of payment solutions that leverage the latest technological innovations and open access to the fastest growing emerging markets across Africa, Europe and Asia. Over the past year, there has been huge demand for its Open Banking and local payment method services, alongside bank transfers, mass payouts, online banking and e-wallets.
Yana Thakurta, Head of Business Development at SPAYZ.io commented: “We look forward to once again participating at iFX Dubai to expand our network of partners and clients. It’s a fantastic way to kick off the year, connecting with thousands of industry leaders from FOREX platforms to trading companies, and everything in between.
“Our key goal for iFX Dubai EXPO 2025 is to expand our portfolio of solutions and geographies. We’re using this as an opportunity to partner with like-minded entities who share our ambition to provide payment solutions that are truly global.”
Come meet SPAYZ.io’s team at the Trade Centre Dubai at Stand 64. You can also book a meeting slot with a member of a team.
The post SPAYZ.io prepares for iFX EXPO Dubai 2025 appeared first on News, Events, Advertising Options.
Airtm, the most connected digital dollar account in the world, is proud to announce the addition of two distinguished industry leaders to its Board of Directors: Rafael de la Vega, Global SVP of Partnerships at Auctane, and Shivani Siroya, CEO & Founder of Tala. These appointments reflect Airtm’s commitment to innovation and financial inclusion as the company enters its next phase of growth.
“We are thrilled to welcome Rafael and Shivani to Airtm’s Board of Directors,” said Ruben Galindo Steckel, Co-founder and CEO of Airtm. “Their unique perspectives and proven track records will be invaluable as we continue scaling our platform to empower individuals and businesses in emerging markets. Together, we’ll push the boundaries of financial inclusion and innovation to create a more connected and equitable global economy. Rafael and Shivani bring a wealth of experience and strategic insight that will strengthen Airtm’s mission to connect emerging economies with the global market.”
Rafael de la Vega, a seasoned leader in fintech global partnerships and technology innovation, is currently the Global SVP of Partnerships at Auctane. With a proven track record of delivering scalable, impactful solutions at the intersection of fintech, innovation, and commerce, Rafael’s expertise will be pivotal as Airtm continues to grow. “Airtm has built a platform that breaks down barriers and opens up opportunities for people in emerging economies to connect to global markets. I am excited to contribute to its growth and help further its mission of fostering financial inclusion on a global scale,” said Rafael.
Shivani Siroya, CEO and Founder of Tala, is a pioneer in financial technology, renowned for empowering underserved communities through access to credit and essential financial tools. Her leadership in leveraging data-driven innovation aligns seamlessly with Airtm’s vision of creating more equitable financial opportunities. “Empowering underserved communities has always been at the core of my work, and Airtm’s mission resonates deeply with me. I’m thrilled to join the Board and work alongside such a dynamic team to expand access to financial tools that truly make a difference in people’s lives,” said Shivani.
The post Airtm Enhances Its Board of Directors with Two Strategic Appointments appeared first on News, Events, Advertising Options.
-
Fintech6 days agoFintech Pulse: Your Daily Industry Brief (Chime, ZBD, MiCA)
-
Fintech PR5 days agoAccording to Tickmill survey, 3 in 10 Britons in economic difficulty: Purchasing power down 41% since 2004
-
Fintech6 days agoSPAYZ.io prepares for iFX EXPO Dubai 2025
-
Fintech6 days agoAirtm Enhances Its Board of Directors with Two Strategic Appointments
-
Fintech PR5 days agoPresident Emmerson Mnangagwa met this week with Zambia’s former Vice President and Special Envoy Enoch Kavindele to discuss SADC’s candidate for the AfDB
-
Fintech PR2 days agoGCL Energy Technology and Ant Digital Technologies Launch First Blockchain-Based RWA Project in Photovoltaic Industry
-
Fintech PR5 days agoStay Cyber Safe This Holiday Season: Heimdal’s Checklist for Business Security
-
Fintech PR5 days agoMedicilon Appoints Dr. Lilly Xu as Chief Technology Officer