Affiliated Transactions Regulation under Section 17 of the Investment Company Act

Summary

This practice note discusses a fund's obligations pursuant to Section 17 (15 USC § 80a-17) of the Investment Company Act, as amended (the ICA), and examines certain conflicts of interest specifically addressed by statute, rule, or order of the US Securities and Exchange Commission (SEC). A fund's compliance with the requirements of Section 17 may significantly impact the scope and nature of its transactional activities, including the manner in which the fund buys and sells portfolio securities, executes trades or manages a fund complex's federal funds deposits overnight. Section 17 compliance also may influence the manner and context within which a fund's board may consider macro transactions, such as mergers and acquisitions; parallel investment vehicle structure; revenue sharing; and entering into underwriting agreements.