The Staff of the SEC’s Division of Investment Management issued a no-action letter on April 27, 2026 to J.P. Morgan Investment Management, Inc. (“JPMIM”) addressing the application of an existing co-investment exemptive order to certain open-end funds and the operation of the “Required Majority” condition. JPMIM requested assurance that open-end funds advised or sub-advised by it or its affiliates could participate in a co-investment program on the same basis as “Regulated Funds” under a prior order permitting affiliated entities to co-invest in negotiated transactions otherwise subject to Sections 17(d) and 57(a)(4) of the 1940 Act. The SEC Staff stated that it would not recommend enforcement action if such funds relied on the order provided they comply with its terms and the representations in the request.
JPMIM represented that any participating open-end fund would adopt policies and procedures designed to ensure fair and equitable allocation of investment opportunities, participation on terms no less favorable than those of other participating funds and board oversight of co-investment activity. It further represented that each fund’s independent directors would maintain ongoing oversight of the program, receive information necessary to evaluate transactions and make the findings required by the order. The request also addressed how the “Required Majority” approval standard would be satisfied. The order requires approval by a majority of independent directors when making determinations relating to the allocation of investment opportunities and participation in co-investment transactions. JPMIM proposed these determinations could be made by a committee of the board comprised solely of independent directors instead of the full board so long as the board has delegated authority to the committee and the committee is otherwise positioned to make the required findings.
The SEC Staff agreed that it would not recommend enforcement action if a duly authorized committee of independent directors satisfied the “Required Majority” requirement based on the facts presented. The letter emphasizes that the committee must be comprised entirely of directors who meet the independence requirements of the 1940 Act and must have sufficient information and authority to perform the functions contemplated by the order.
The letter provides helpful guidance and clarification regarding the application of co-investment frameworks within large fund complexes particularly with respect to board processes and the practical administration of required approvals. A link to the letter can be found here.