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SEC Staff Provides TALF-Related Relief to Investment Companies's picture
Commentary by Nihal Patel

The SEC Division of Investment Management provided conditional no-action relief for registered investment companies participating in the 2020 Term Asset-Backed Securities Loan Facility ("TALF 2020").

The Division reaffirmed and expanded upon no-action positions outlined in two 2009 letters relating to the 2008 version of TALF. The staff noted that certain aspects of TALF 2020 are different from the prior version, but said that it viewed "[certain] structural differences and other potential changes [as] not relevant for purposes of the provisions of the Investment Company Act at issue in the 2009 letters."

Franklin Templeton Investments (June 19, 2009). Under this letter, the staff provided no-action relief for registered closed-end (including business development companies ("BDCs")) or open-end investment companies: (i) under ICA Sections 18(a)(1), (c) and (f)(1), if the company participated in TALF without treating the borrowing as a "senior security" representing indebtedness, and (ii) under ICA Section 17(f), it engaged in the "custody arrangements necessitated by TALF." The staff reaffirmed the views in the Franklin letter as applicable to TALF 2020 in the same manner as they were made applicable to TALF 2008. (The staff also noted that references to ICA release 10666 in the Franklin letter will continue to apply, notwithstanding an SEC proposal to rescind that statement regarding asset segregation requirements.)

T. Rowe Price Associates Inc. (Oct. 8, 2009). Under this letter, the staff provided no-action relief to certain T. Rowe Price-affiliated registered investment companies ("RICs"), managed accounts and common trust funds under ICA Sections 17(a) and (d) and Rule 17d-1, in order to permit those vehicles to purchase interest in private funds organized for the specific purpose of acquiring TALF-eligible collateral. The staff expanded the scope of this letter to make it applicable to non-T. Rowe Price entities, and added a no-action position under ICA Section 57(a) for business development companies to rely on the T. Rowe Price letter where facts are "substantially similar." The staff also indicated that an RIC or BDC could act in accordance with the T. Rowe Price letter "without regard to the borrowing limits on certain Funds that invest in the Private Fund."

For further details on TALF, see the TALF Task Force page on the Cadwalader site, which includes an archive of a webcast given by Cadwalader attorneys on April 30, 2020 and a series of related Memoranda.


The 2009 T. Rowe Price letter was always a bit of an oddity in that it, without much specificity as to why, went out of its way to state that the incoming letter was "very fact specific" and so relief did not apply to third parties. The staff was right to restate the conclusion of the 2009 letter.

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