- 8 - (SEC). The 1940 Act permits one trust document to serve as the governing instrument for more than one RIC. Each additional RIC covered by a preexisting trust document is established as a separate "series" of that trust. In effect, the trust establishing one RIC can support any number of additional separate series RIC's. RIC's are governed by a board of directors (or trustees) initially assembled by the RIC sponsor, who, like petitioner, is usually also the RIC adviser and the RIC distributor. After the selection of the initial board of trustees, vacancies on the board of trustees are filled by nominations from the board of trustees, subject to shareholder approval. In the case of RIC's established as separate series, they are automatically governed by the board of trustees of the preexisting trust. The 1940 Act was passed, in part, to protect investors by regulating the potential conflict of interest arising from the fact that RIC's are typically created and managed by the investment adviser. Section 80a-10(a) of the 1940 Act regulates this type of potential conflict by requiring that a RIC's board of trustees consist of members no more than 60 percent of whom can be "interested persons of such registered company." A RIC has no employees, and its board of trustees oversees the investment adviser's activities to insure that the RIC's securities investments remain consistent with its investment objective, that the RIC's portfolio meets an acceptable level ofPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011