Securities Regulation Daily Wrap Up, INVESTMENT COMPANIES—SEC makes long-overdue correction to reflect vacatur, (Aug 5, 2026)
Technical revisions remove provisions vacated nearly two decades ago.
The SEC adopted technical amendments to remove regulatory text that remained in the CFR despite being vacated two decades ago. The amendments affect Rule 0-1(a)(7) under the Investment Company Act and remove requirements that 75 percent of a fund's directors and the board's chair be disinterested and revert to the requirement that a simple majority of directors be disinterested. An appellate court vacated these requirements in 2006, but they have remained in the text until now (Investment Company Governance Technical Amendments, Investment Company Act Release No. 36282 (Aug. 4, 2026)).
The rule. Investment Company Act Rule 17 CFR 270.0-1(a)(7) establishes governance standards that regulated funds must satisfy to rely on various exemptions under the Act. Fund governance standards requiring, among other items, that boards have a majority of disinterested directors were adopted in 2001.
The governance standards were expanded in 2004. Among other requirements, the rulemaking added paragraph (a)(7) to Rule 0-1 to require that at least 75% of the directors of the regulated fund be disinterested and that a disinterested director serve as chairman of the fund's board.
Vacatur. In 2006, the D.C. Circuit vacated both the 75% and the chairman requirements in Chamber of Commerce of the United States v. SEC, No. 05-1240 (D.C. Cir. Apr. 7, 2006). The appeals panel ruled that the SEC violated the comment requirements of the Administrative Procedure Act by relying on extra-record materials when estimating the costs of the rules without affording an opportunity for comment to the prejudice of the plaintiff Chamber of Commerce. The court vacated the rules and provided 90 days to reopen the record for comment, but the Commission never did.
Text removed. The court's ruling had the effect of restoring the fund governance standards that existed before the 2004 amendments. The vacated text, however, remained in the Code of Federal Regulations.
The technical amendments simply revise the CFR to reflect the court’s vacatur, reverting to the requirement of a simple majority of directors of the regulated fund be disinterested directors. Other governance provisions adopted in 2004 that were not affected by the court’s ruling remain in place.
Commissioner Uyeda issued a short statement noting that the regulations now "reflect reality." He said: “The court’s mandate has been clear since 2006, and updating the Code of Federal Regulations to reflect this outcome is long overdue."
The release is scheduled to be published in the Federal Register on August 6, 2026 and will become effective upon publication.
The release is No. IC-36282.
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