SEC Keeps Fund Trading Rules Intact with Public Input
Published Date: 5/28/2025
Notice
Summary
The SEC wants to keep Rule 17a-10, which lets certain fund advisers trade with related funds under special rules. This mainly affects subadvisers who manage parts of investment funds and need to follow contract limits to avoid conflicts. The SEC is asking for public comments before extending this rule, with no new costs or big changes planned.
Analyzed Economic Effects
4 provisions identified: 2 benefits, 2 costs, 0 mixed.
Allows subadvisers to transact with affiliates
Rule 17a-10 lets a subadviser enter into transactions with funds it does not advise but that are affiliated with a fund it does advise, and lets a subadviser (and its affiliates) transact with funds it does advise only with respect to discrete portions of the fund. Those permissions are available only when the subadvisory relationship is the sole reason section 17(a) would otherwise bar the transaction.
One-time contract amendment burden for new funds
The SEC estimates about 49 funds enter new subadvisory agreements each year and that adding the required contract clauses for rule 17a-10 will take 0.75 hours per fund (apportioned), resulting in about 37 burden hours annually and an estimated total cost of $18,907 per year for those contract changes.
No ongoing burden for existing funds
The staff assumes that funds with existing subadvisory contracts amended those contracts to comply when rule 17a-10 was adopted in 2003, so there is no continuing burden for those existing funds.
Specific contract language required to qualify
To rely on the exemptions in rule 17a-10, advisory contracts must prohibit subadvisers from consulting with each other about fund securities transactions and must limit each subadviser’s responsibility to discrete portions of the portfolio; complying with this information collection is necessary to obtain the exemption.
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