On 4 August 2026, US Securities and Exchange Commission (US SEC) Commissioner Mark T. Uyeda issued a statement supporting the Commission's adoption of Technical amendments to Rule 0-1(a)(7) under the Investment Company Act of 1940. The amendments update the Code of Federal Regulations to reflect the legal effect of the 2006 decision of the United States Court of Appeals for the District of Columbia Circuit, which vacated the requirement that at least seventy five per cent of a regulated fund's board comprise independent directors and the requirement for an independent board chair. The Commissioner stated that the amendments restore consistency between the regulatory text and binding judicial authority. The accompanying final rule confirms that the amendments do not introduce new governance obligations but instead revise the Code of Federal Regulations to reflect the legal position that has existed since the court's vacatur became effective in July 2006.
What is Rule 0-1(a)(7)
Rule 0-1(a)(7) establishes governance standards that registered investment companies and business development companies must satisfy to rely upon various exemptive rules under the Investment Company Act of 1940. The Commission originally adopted these governance standards in 2001 to strengthen the independence and effectiveness of disinterested directors. In 2004, the Commission expanded those standards by introducing seven additional governance requirements, including that at least seventy five per cent of a regulated fund's directors be disinterested and that the chair of the board also be a disinterested director.
Federal Court Vacatur Remained Effective Since 2006
In 2006, the United States Court of Appeals for the District of Columbia Circuit vacated both the seventy five per cent independent director requirement and the independent chair requirement. The Court held that the Commission had violated the Administrative Procedure Act by relying upon material that had not been made available for public notice and comment. Although the Commission subsequently sought further public comment, it did not appeal or modify the court's mandate. The vacatur became effective on 6 July 2006, thereby restoring the governance standards that existed before the 2004 amendments.
Commissioner Uyeda Calls for Regulatory Text to Reflect Judicial Reality
Commissioner Mark T. Uyeda described the amendments as a necessary measure to align the Commission's regulations with the legal position that has existed for nearly two decades.
He stated:
"The text of the Commission's regulations should reflect reality. More than 20 years ago, the U.S. Court of Appeals for the District of Columbia Circuit vacated a rulemaking that would have mandated a board with no less than 75% independent directors and an independent chair as a condition to reliance on certain exemptive rules. The court's mandate has been clear since 2006, and updating the Code of Federal Regulations to reflect this outcome is long overdue."
The Commissioner explains that the amendments correct the regulatory text so that it accurately reflects the Federal court's decision and the legal framework that has governed regulated funds since July 2006.
Commissioner Uyeda further stated:
"Thus, I am pleased to support the Commission's adoption of these technical amendments to rule 0-1(a)(7), which bring our regulations into alignment with the Federal court's vacatur of both the 75% requirement and the independent chair requirement. These amendments are a necessary step to reaffirm our commitment to sound regulatory principles."
The Commissioner presents the amendments as an exercise in maintaining regulatory accuracy by ensuring that the Code of Federal Regulations reflects binding judicial authority.
US SEC Removes Obsolete Governance Requirements
The final rule removes references to the vacated seventy five per cent independent director requirement and the independent chair requirement from Rule 0-1(a)(7). It restores the requirement that a simple majority of directors be disinterested directors. The remaining governance standards, including requirements relating to the nomination of disinterested directors, independent legal counsel, annual board evaluations, quarterly executive sessions of disinterested directors and the authority to retain advisers, remain unchanged.
Administrative Procedure Act
The Commission determined that notice and public comment were unnecessary because the amendments do not impose new substantive regulatory obligations. Instead, the amendments merely update the Code of Federal Regulations to reflect the court's vacatur. On the same basis, the Commission concluded that there was good cause for the amendments to become effective immediately on 6 August 2026.
Regulatory Note
The Commissioner's statement should be understood alongside Release No. IC-36282 rather than as an independent regulatory action. The legal effect of the amendments is limited to revising the Code of Federal Regulations so that it reflects the judicial position established by the United States Court of Appeals for the District of Columbia Circuit in 2006. The amendments do not create new governance standards, alter existing compliance obligations or reverse the court's decision. Instead, they remove regulatory provisions that had remained in the Code despite having been vacated by the Federal court nearly twenty years earlier.
Footnotes
- US Securities and Exchange Commission, Investment Company Governance Technical Amendments, Release No. IC-36282, 4 August 2026.
- Statement of Commissioner Mark T. Uyeda, Restoring Regulatory Clarity: Statement on Technical Amendments to Rule 0-1(a)(7), 4 August 2026.
- Chamber of Commerce of the United States v. Securities and Exchange Commission, 443 F.3d 890 (D.C. Cir. 2006).
- Administrative Procedure Act, 5 U.S.C. § 553.
- Investment Company Act of 1940, Rule 0-1(a)(7), 17 CFR Part 270.
