On September 29, 2026, the staff of the SEC’s Division of Investment Management issued a no-action letter permitting investment companies registered under the Investment Company Act of 1940 and business development companies (BDCs) to offer retail shareholders the option to utilize directed voting programs. Under a directed voting program, a shareholder can give a revocable standing instruction to have their fund shares voted in favor of proposals which the fund’s board, including all of its independent directors, has approved and recommended that shareholders approve. The relief applies to annual and special shareholder meetings only, and not shareholder action by written consent. The relief does not apply to contested director elections or changes to a fund’s investment advisory agreement with its primary adviser that require a shareholder vote. Furthermore, shareholders must be given the option to exclude from their standing voting instructions proposals regarding fund mergers and Rule 12b-1 plans (Opt-Out Items).
Relief Provided. The no-action letter provides relief with respect to rules 14a-3(a), 14a-4(d)(2), 14a-4(d)(3), 14a-4(f), 14a-6(o), 14a-10 and 14a-12(a) under the Securities Exchange Act of 1934, and is similar to no-action relief that the SEC’s Division of Corporation Finance recently provided to Exxon Mobil Corporation, The Goldman Sachs Group, Inc. and Tesla, Inc. with respect to retail shareholder voting programs for operating companies. The no-action letter does not provide relief with respect to the Investment Company Act, the Investment Advisers Act or any rules thereunder.
Conditions for Relief. The no-action relief is subject to numerous conditions, which are summarized here. The directed voting program must be approved by the fund’s board, including all independent directors, prior to implementation. The program must be reexamined and reapproved by the fund’s board, including all independent directors, at least every three years in order to continue the program, and such reapproval must be based on a determination that the program remains in the best interests of fund shareholders.
A directed voting program must be made available to all retail shareholders at no cost. Participating shareholders must be permitted to cease participating in the program and cancel their standing voting instruction at any time at no cost; however, shareholders do not have the right to cancel standing voting instructions with respect to shareholder meetings for which the fund has filed a definitive proxy statement or Form N-14 registration statement.
A fund must continue to provide participating shareholders with the same required information relating to shareholder meetings (e.g., proxy statement), and the proxy statement must prominently disclose (and the fund website must also disclose) information about the fund’s directed voting program. Shareholders must be permitted to override votes to be cast on their behalf pursuant to standing instructions by voting their shares pursuant to the options set forth in the proxy materials they received for the shareholder meeting.
Participating shareholders must also receive, during the time period when the fund is not soliciting votes for a shareholder meeting, an annual reminder of their standing voting instructions and exclusions. The reminder must notify shareholders (i) of their ability to cease participating in the program and cancel their standing voting instruction with respect to subsequent meetings and (ii) that, to the extent permitted by applicable state law, the fund’s organizational documents and any applicable exchange listing standards, shareholders that do not opt out of the program prior to the filing of a relevant proxy statement with the SEC in relation to a particular shareholder meeting will be deemed to be present at such meeting for purposes of establishing a quorum. In addition, shareholders who do not exclude the Opt-Out Items from their standing voting instructions must receive an additional reminder prior to any shareholder meeting involving one or more Opt-Out Items.
The no-action letter and the related request are available here.
