SEC Staff Issues Additional Names Rule FAQs

April 7, 2026

SEC Staff Issues Additional Names Rule FAQs

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On February 18, 2026, the SEC staff issued four additional frequently asked questions (FAQs) related to Rule 35d-1 under the Investment Company Act of 1940 (the Names Rule). The additional FAQs follow the staff’s January 2025 updates to the Names Rule FAQs that addressed various topics related to the amendments to the Names Rule that the SEC adopted in 2023. The amended Names Rule provides, among other things, that a fund’s name may not use terminology suggesting that the fund invests its assets in a particular type of investment, industry, group of industries, country, geographic region, or in investments that have, or whose issuers have, particular characteristics, unless the fund adopts either a fundamental or non-fundamental policy to invest, under normal circumstances, at least 80% of its assets in the investments suggested by its name). As a reminder, in March 2025, the SEC extended the compliance date for the 2023 Names Rule amendments from December 11, 2025 to June 11, 2026 for large fund groups (net assets of $1 billion or more as of the end of their most recent fiscal year), and from June 11, 2026 to December 11, 2026 for small fund groups (less than $1 billion in net assets as of the end of their most recent fiscal year). Furthermore, the SEC modified the operation of the compliance dates to allow funds to comply as of their first “on-cycle” registration statement amendment or annual shareholder report, depending on the type of fund, following their applicable new compliance date.

The four additional Names Rule FAQs issued in February 2026 are summarized below:

Shareholder Notice of Changes to a Non-Fundamental 80% Policy.

The staff stated that it would not object if a fund did not provide 60 days’ notice to shareholders of nonmaterial changes to an existing non-fundamental 80% policy, provided that the changes are made solely to comply with the amended Names Rule requirements or to make the 80% policy more stringent in light of how the amended Names Rule applies to the fund’s name (e.g., adding investments with “value” characteristics to the 80% policy of a fund with “small-cap value” in its name).

Cash Holdings to Cover Unfunded Commitments.

In determining compliance with its 80% policy, a fund may include the value of any cash and cash equivalents that cover unfunded commitments to invest equity in a private fund or special purpose vehicle (SPV) that owns or will own one or more private assets, provided that the private fund or SPV will be included in the 80% bucket and the fund reasonably expects the commitment to be called. The staff also provided its view that a fund taking this approach should disclose this methodology for applying the 80% policy in its registration statement.

Use of Terms that Further Modify “Growth” or “Value” in Fund’s Name.

The staff provided its view that there are certain limited cases where the terms “growth” or “value” are paired with other terms in a fund’s name in ways that change the overall context and communicate something different about the overall characteristics of the fund’s portfolio, such that investments with “growth” or “value” characteristics are not the fund’s investment focus, and that a fund would not be required to adopt an 80% policy regarding “growth” or “value” investments (as the case may be) in those circumstances. As an example, the staff provided its view that the combination of the terms “income” and “growth” in a fund’s name generally indicates that the fund seeks to achieve a portfolio-wide outcome of growth of capital, along with current income, in which case a fund would not be required to adopt an 80% policy regarding “growth.”

Use of “Merger” or “Merger Arbitrage” in Fund’s Name.

The staff stated its understanding that funds with the term “merger” or “merger arbitrage” in their names pursue an investment strategy that generally seeks returns from inefficiencies in asset pricing that may occur before or after mergers or other types of reorganization events. The staff provided its view that this suggests an investment technique or a portfolio-wide result to be achieved, as opposed to an investment characteristic, and therefore does not require the fund to adopt an 80% policy with respect to those terms.

The updated Names Rule FAQs are available here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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