关于封闭式基金收购防御可用性的建议（pdf）

M A RC H 2020 The Investment Company Institute1recommends that the Securities and ExchangeCommission issue guidance clarifying the ability of closed-end funds to employ certain defensesagainst hostile campaigns from “activist” investors.2In 2010, the Commission’s staff issued a no-action response,Boulder Total Return Fund, Inc.,3that questioned whether closed-end funds couldemploy certain takeover defenses available under state law consistent with the InvestmentCompany Act of 1940. Although the defense measure at issue inBoulderwas the Maryland“control share” statute, the letter’s reasoning arguably implicates a number of defenses otherwiseavailable to funds organized in various states. As a result, closed-end funds and their boards havebeen limited in their ability to defend against activists. The activist campaigns have since grownmore numerous and sophisticated, harming the interests of long-term fund investors. The conclusions of theBoulderletter are incorrect, and the use of several common takeoverdefenses authorized by state law are fully consistent with both the language of the InvestmentCompany Act and its underlying purposes. Especially in light of the considerable negative impactof the intensified activist attacks on closed-end funds and their shareholders, we recommend thattheBoulderletter be withdrawn, and that the Commission issue guidance clarifying that closed-end funds can employ, among others, the common takeover defenses discussed below consistentwith the Investment Company Act. Table of Contents A.How Activists Pursue Their Self-Interested Agenda ...............................................5B.Growing Intensity of Activist Campaigns ...............................................................9C.The Negative Effect of Activist Campaigns on Funds andLong-Term Investors ............................................................................................11 III.Takeover Defenses of Potential Use to Closed-End Fund Boards ................................15 IV.Relevant Provisions Under the Investment Company Act .............................................16 A. Section 18(i) .............................................................................................................16B. Other Investment Company Act Provisions ............................................................21 V.Takeover Defenses Are Consistent with the Investment Company Act ........................23 A. Section 18(i) Does Not Prohibit the Use of Voting-Related TakeoverDefenses by Closed-End Funds ................................................................................23B. Common Takeover Defenses Not Implicating Voting RightsAre Consistent with the Investment Company Act...................................................25C. Enabling Independent Directors to Use Takeover Defenses toPrevent Detrimental Arbitrage Efforts Furthers the Purposesof the Investment Company Act ...............................................................................26D. The Availability of Defenses Against Activist CampaignsWill Not Preclude Other Types of Shareholder Proposalsand Initiatives............................................................................................................30 VI.Enabling Independent Directors to Use Takeover Defense Measures toEnsure the Availability of Closed-End Funds for Retail InvestorsPromotes the SEC’s Policy Goals ..................................................................................30 VII.TheBoulderLetter Should Be Withdrawn, and Commission GuidanceShould Be Issued to Make Clear That Common Takeover DefenseMeasures Are Available to the Directors of Closed-End Funds.....................................31 I.Executive Summary In recent years, activist investors have intensified their efforts to seize a controlling interestin closed-end funds to pursue a self-interested agenda to extract short-term profits. These arbitragetactics cause serious harm to funds and work against the interests of their long-term investors,including forcing fundamental changes to the products that are contrary to what stockholderssought when making their investment. Activists also can demand actions that can cause funds toshrink in size or be liquidated altogether, thereby reducing the availability of closed-end funds toinvestors and increasing costs. Decreasing the number of closed-end funds harms a largedemographic of closed-end fund shareholders—including retirees many of whom rely on thedividends from closed-end funds.4 If a closed-end fund board concludes that an activist’s goals are not in the best interests ofthe fund and its shareholders, the directors may wish to employ one or more of the commontakeover defenses authorized under applicable state law.5Like registered mutual funds, closed-endfunds are governed by both federal and state law, and defensive measures must therefore complywith applicable state law and the Investment Company Act. Defenses that limi