ICI Asks SEC to Allow Investment Companies to Co-Invest with Affiliates

The Investment Company Institute ("ICI") urged the SEC to approve "principles-based" exemptive relief for an applicant, or to issue a class order "allowing any fund or asset manager with an existing co-investment order to engage in co-investment transactions in reliance on the conditions" contained in the instant application.  

The ICI argued that co-investment relief from the requirements of Investment Company Act Section 17(d) ("Joint Ventures") and Rule 17d-1 ("Applications regarding joint enterprises or arrangements and certain profit-sharing plans") "has become a virtual necessity for managers of regulated funds investing in privately placed assets, in particular managers of private credit focused closed-end funds and [business development companies]." The ICA Section 17(d) rules prohibit joint investments by a registered investment company and a variety of affiliated persons unless an application regarding such joint arrangement has been filed with the Commission and has been granted by an Order.

The ICI stated that "the existing co-investment regime is a body of highly technical exemptive applications and orders that has resulted in the development of more than a dozen required conditions and sub-conditions to be satisfied for any particular transaction." The ICI argued that the "[c]umbersome exemptive relief" process ultimately deprives investment funds of beneficial opportunities and imposes administrative burdens and restricts investment opportunities for funds and their investors.

The ICI recommended the SEC: (i) consider potential amendments to Rule 17d-1; (ii) allow further amendments to exemptive relief; and (iii) make the revised co-investment relief broadly available.