SEC Updates Rule 0-1(a)(7): What Fund Compliance Teams Need to Know

The SEC has adopted technical amendments to Rule 0-1(a)(7), which sets governance standards for regulated funds relying on certain exemptions under the Investment Company Act. The change removes two requirements that were struck down by a federal court nearly two decades ago, bringing the written regulation into line with the law already in effect.

What Changed in Rule 0-1(a)(7)

The SEC removed language requiring at least 75% of a regulated fund's directors to be disinterested and requiring the board chair to be a disinterested director. Both requirements were vacated by a federal appeals court in 2006, but the outdated language remained in the Code of Federal Regulations.

Why the SEC Made the Change Now

The amendment is intended to make the regulatory text accurately reflect the court's earlier decision. The SEC emphasized that the update is technical and does not create new substantive compliance obligations.

Who This Affects

The amendment is primarily relevant to registered investment companies and business development companies that rely on exemptive rules tied to Rule 0-1(a)(7). Fund boards, investment management counsel, and compliance teams should be familiar with the corrected governance standards.

What Fund Compliance Teams Should Review

Although the amendment does not impose new requirements, compliance teams should review governance manuals, board materials, internal policies, and templates to make sure they do not continue to describe the vacated 75% independence or independent-chair requirements as mandatory.

The Majority Independence Standard Remains

Rule 0-1(a)(7) continues to require a majority of fund directors to be disinterested directors. Other governance provisions that were not affected by the 2006 court decision also remain in place.

When the Amendment Took Effect

The technical amendments became effective on August 6, 2026. Because they simply conform the CFR to a court ruling that has been legally effective since July 2006, the SEC did not establish a separate transition or grace period.

How SJKP Can Help

SJKP's corporate and securities attorneys can assist investment companies, fund managers, and compliance teams with regulatory reviews, fund governance matters, internal policies, and SEC compliance. Organizations reviewing their governance documentation can work with counsel to identify outdated requirements and confirm that current procedures reflect applicable federal securities law.