The SEC on August 4, 2026, adopted technical amendments to its investment company governance rules to update federal regulations and reflect a federal court decision that vacated certain fund governance requirements adopted in 2004.
The commission revised Rule 0-1(a)(7) under the Investment Company Act of 1940 and updated the Code of Federal Regulations to reflect the legal effect of a court ruling that eliminated two governance provisions affecting registered investment companies and business development companies, collectively referred to as regulated funds, according to Release No. IC-36282, Investment Company Governance Technical Amendments.
The SEC said the court’s vacatur took effect on July 6, 2006, and restored the governance standards that were in place before the 2004 amendments. The technical amendments remove references in the regulations to the vacated requirements and reinstate the prior standard that a majority of a fund’s directors be disinterested directors.
Rule 0-1(a)(7) establishes governance standards that funds must satisfy to rely on various exemptive rules under the Investment Company Act. The SEC originally adopted governance standards in 2001 to enhance the independence and effectiveness of disinterested directors. Those standards required, among other provisions, that a majority of a fund board consist of disinterested directors and did not require the board chair to be a disinterested director.
In 2004, the SEC amended the governance standards to set out seven requirements, including the 75% disinterested director requirement and the disinterested board chair requirement. Those amendments became effective on September 7, 2004.
In 2006, the U.S. Court of Appeals for the District of Columbia Circuit vacated the 75% director independence requirement and the requirement that a disinterested director serve as board chair. The court determined that the SEC’s adoption of those provisions violated the Administrative Procedure Act because the agency relied on materials that had not been made available for public notice and comment.
The SEC stated that the court’s action did not affect other provisions adopted in the 2004 amendments. As a result, the newly adopted technical amendments leave those remaining provisions unchanged while removing the vacated requirements from the regulatory text.
Under the revised rule text, a fund satisfies the governance standards if a majority of directors are disinterested directors; disinterested directors select and nominate other disinterested directors; legal counsel to disinterested directors meets the definition of independent legal counsel; the board conducts an annual self-evaluation; disinterested directors meet at least quarterly without interested directors present; and disinterested directors are authorized to hire employees, advisers, and experts necessary to perform their duties.
In a statement, SEC Commissioner Mark Uyeda said the text of the regulation should reflect reality.
“The court’s mandate has been clear since 2006, and updating the Code of Federal Regulations to reflect this outcome is long overdue,” he said. “Thus, I am pleased to support the Commission’s adoption of these technical amendments to rule 0-1(a)(7), which bring our regulations into alignment with the Federal court’s vacatur of both the 75% requirement and the independent chair requirement. These amendments are a necessary step to reaffirm our commitment to sound regulatory principles.”
The SEC said it did not seek public notice and comment before adopting the amendments, citing the Administrative Procedure Act’s good-cause exception. The agency stated that the changes impose no new substantive requirements and merely reflect the court’s vacatur of the two governance provisions.
The amendments become effective upon publication in the Federal Register.
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