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Vedder Thinking | Articles SEC Staff Issues No-Action Letter Extending Existing Multi-Manager Exemptive Relief to Non-Wholly-Owned Affiliated Sub-Advisers


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On July 9, 2019, the staff of the SEC’s Division of Investment Management issued a no-action letter to the BNY Mellon family of funds and BNY Mellon Investment Adviser, Inc. (collectively, BNYM) stating that the staff would not recommend enforcement action if a fund complex and adviser that previously obtained a “multi-manager” or “manager of managers” exemptive order engages any sub-adviser, regardless of the extent of the sub-adviser’s affiliation with the adviser, without seeking an amended exemptive order from the SEC. The staff’s no-action position is conditioned on compliance with several conditions set forth in the recent exemptive order issued to Carillon Series Trust and Carillon Tower Advisers, Inc., which was the first exemptive order issued by the SEC extending multi-manager exemptive relief to all sub-advisers, regardless of the extent of the sub-adviser’s affiliation with the adviser.

BNYM’s existing manager-of-managers exemptive order permits it to enter into and materially amend sub-advisory agreements with sub-advisers without obtaining shareholder approval and to disclose the fees paid to the sub-advisers on an aggregate, rather than on an individual, basis. However, BNYM’s exemptive relief applies only to sub-advisers that are either unaffiliated with BNYM or that are wholly-owned subsidiaries of BNYM’s ultimate parent company. In other words, the exemptive relief by its terms does not cover affiliated sub-advisers that are not wholly owned. The staff’s no-action position effectively expands the scope of BNYM’s exemptive relief to be in line with that granted to Carillon, subject to the conditions set forth in the Carillon exemptive order.

The exemptive relief in Carillon’s recent order was subject to conditions similar to those in other multi-manager exemptive orders but with the following key differences:

  • Elimination of a requirement that the adviser provide the board with quarterly information about the profitability of the adviser on a per sub-advised fund basis.
  • Addition of a requirement that the board evaluate potential material conflicts of interest when a sub-adviser change is proposed or when the board considers an existing sub-advisory agreement as part of its annual 15(c) review process.
  • Addition of a requirement that the adviser provide the board with certain information related to material conflicts of interest during the annual 15(c) review process, including:
    • any material interest the adviser has in the sub-adviser and any material impact the proposed sub-advisory agreement may have on that interest;
    • any arrangement or understanding involving the adviser that may have a material effect, or be materially affected by, the sub-advisory agreement;
    • any material interest in a sub-adviser held directly or indirectly by an officer or director of the sub-advised fund, or an officer or director of the adviser; and
    • any other information that may be relevant to the board in evaluating potential material conflicts of interest with respect to the sub-advisory agreement.

The BNYM no-action letter permits a fund to rely upon the Carillon exemptive order without the need to amend the fund’s prior multi-manager exemptive order, subject to compliance with the conditions in the Carillon order. Among these conditions is a requirement that the fund obtain shareholder approval to operate as a fund using multi-manager relief for affiliated sub-advisers with respect to any existing or future sub-adviser going forward. Alternatively, a fund may continue to rely on its prior multi-manager order solely with respect to the types of sub-advisers covered by that order, but it may choose to comply with the conditions in the Carillon order instead of the conditions in the fund’s existing multi-manager order, provided the fund does so with respect to all existing and future sub-advisers going forward.

Read the SEC staff’s no-action letter to BNYM here.

BNYM’s request for the no-action position is available here


Nathaniel Segal


Jacob C. Tiedt


John S. Marten