August 16, 2022

Vanessa A. Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street NE
Washington, DC 20549

Re: Investment Company Names
File No. S7-16-22

Dear Ms. Countryman:

The Asset Management Group (the “AMG”) of the Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to provide comments to the United States Securities and Exchange Commission (the “SEC”) on the SEC’s proposed rule and form amendments pertaining to fund names (the “Proposal”).2

The Proposal sets forth amendments to Rule 35d-1 (the “Names Rule”) and certain reporting requirements under the Investment Company Act of 1940 (the “1940 Act”) that would expand the scope of the Names Rule; add prescriptive compliance, reporting, and recordkeeping requirements; and create a number of new interpretive issues for funds and the SEC Staff. While we appreciate that a fund name can be an important piece of information that investors consider when making investment decisions, we are concerned that the Proposal over-emphasizes the importance of fund names and in the process, implies that it is reasonable for investors to rely solely on the name of a fund when making an investment decision and minimizes the importance of other information available to investors, including a fund’s prospectus disclosure. The Proposal includes overly prescriptive and at times arbitrary requirements, and introduces a new level of subjectivity that would likely contribute to investor confusion. We believe that the Proposal does not sufficiently articulate any extant risks to investors that would justify the sweeping and disruptive changes proposed. We also suspect that the Proposal could lead to unintended consequences that might ultimately be harmful to investors. We therefore question whether the goal of greater investor protection articulated in the Proposal would in fact be achieved. Further, we believe that the cost-benefit analysis included in the Proposal contains fundamental flaws in that it underestimates the costs associated with certain of the newly proposed requirements, and omits other costs entirely, all of which seem likely to adversely impact funds and their shareholders, with questionable associated benefit. Given that the Proposal’s expansion of the scope of the Names Rule would subject a significant number of funds not currently required to comply with the Names Rule to its requirements with the effect of restricting investment flexibility with respect to 80% of each of those funds’ assets, and that such a restriction could adversely affect shareholders not only during periods of persistent market underperformance, but also during bouts of day-to-day market volatility, we think the SEC’s burden to demonstrate extant risks and potential shareholder harm is a high one and has not been met. At the very least, the SEC should demonstrate that the risk and potential harm to shareholders of relying on a fund name that includes a term like “value” to make their investment decision is greater than the risk and potential harm to shareholders of substantially restricting the investment flexibility of their funds’ investment managers.

 

1 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. For more information, visit http://www.sifma.org/amg. SIFMA AMG appreciates the assistance of John McGuire, Laura Flores, Amy McDonald and Court Tomplait, of Morgan, Lewis & Bockius LLP in the preparation of this response.

2 Investment Company Names, Release No. 33-11067; 34-94981; IC-34593 (May 25, 2022), https://www.sec.gov/rules/proposed/2022/33-11067.pdf.