Rule 17a-6, Exemption for Transactions with Portfolio Affiliates

Rule 17a-6 (17 CFR 270.17a-6) under the Investment Company Act of 1940 (the “Act”), permits a fund, or a company controlled by the fund and a “portfolio affiliate,” to engage in principal transactions in which it is unlikely that the portfolio affiliate would be in a position to take advantage of the fund (i.e., there is a material financial interest in the transaction). A fund cannot rely on rule 17a-6, if the fund’s directors, employees or investment adviser) have a financial interest in a party to the principal transaction. Rule 17a-6 defines what interests are not “financial interests” for purposes of the exemption. For certain types of “financial interests”, for a fund to rely on rule 17a-6, the fund’s board, including a majority of the directors who are not interested persons of the fund, must find that the that the “financial interests” are not material to the decision to enter into the principal transaction. In addition, the board is required to record the basis for its decision in its meeting minutes.

The latest form for Rule 17a-6, Exemption for Transactions with Portfolio Affiliates expires 2029-01-31 and can be found here.