According to a SEC press release, the new rules will codify several exemptions from the Act that the regulator has issued over the years, and the form amendments will provide greater transparency of expenses investors in fund-of-funds arrangements pay.

The amended forms will now require a registered fund that invests any of its assets in another fund to include in its fee table fees and expenses charged by the fund and any fund in which it invests, according to the release. The SEC said the increased transparency of fund-of-funds expenses is intended to allow investors to understand and more easily compare the relative costs of different fund-of-funds arrangements.

The three new rules eliminate the need for funds and their advisors to file exemptive applications in certain circumstances to the SEC for review. The rules, codified because they do not create risk for the fund or investors, are:

• Rule 12d-1-1 permits “cash sweep arrangements,” under which a stock or bond fund may invest its available cash in a money market fund. 
• Rule 12d-2 permits greater flexibility to a fund-of-funds arrangement that invests exclusively or primarily in funds in the same fund group. 
• Rule 12d-3 permits greater flexibility for a fund that invests small amounts in many unaffiliated funds to structure the sales load it charges (but does not increase the overall amount charged).

The new rules become effective July 31.

The Wall Street Journal reports that the Investment Company Institute (ICI) said in a statement, “The final rule will benefit funds, their shareholders and taxpayers. Funds will have additional flexibility to enter into fund-of-funds arrangements and will not have to bear the cost and time of obtaining exemptive orders. The final rule also will relieve the burden on the commission of processing these orders.”