(The article featured below is a selection from SEC No-Action Letter Weekly, which is available to subscribers of that publication.)

Staff Grants Relief to Advisers in Wake of Government Intervention

The Division of Investment Management confirmed oral no-action relief granted to SEC-registered investment advisers affiliated with Fortis Investment Management SA in a letter dated January 27, 2009 in connection with the government seizure of Fortis Group. Multiple sovereign governments acted to prevent the collapse of Fortis during the market turmoil last fall. Given the emergency nature of the actions, the staff advised that it would not recommend enforcement action against the Fortis advisers or the registered investment companies for which they serve if the Fortis advisers serve as investment advisers under a continuance without prior in-person approval by the board of directors and without approval by a majority of the outstanding voting securities.

Fortis Group is an international banking, insurance and financial services company headquartered in Europe. The Fortis advisers serve institutional and high net worth clients around the world, including SEC-registered investment companies. When the global financial crisis led Belgian and Dutch regulators to fear that investors and depositors had lost confidence in Fortis, they acquired ownership positions in Fortis Group.

The regulators' goal was to provide temporary relief through cash infusions and stabilize Fortis while a private sector buyer was found. When the decline in market confidence in Fortis continued, the government bought out the remaining stake.

The Investment Company Act provides that, in the event of an assignment, the advisory agreements terminate automatically. An assignment is any direct or indirect transfer of an agreement by the assignor, or of a controlling block of the assignor's outstanding voting securities, by the security holder of the assignor. The Act permits an investment adviser to serve temporarily after the advisory agreements are terminated under interim agreements subject to certain conditions.

One condition is that each fund's board, including a majority of the non-interested directors, must have voted in person to approve the interim contract in advance of the termination of the shareholder-approved previous contract. The interim contract may not have a duration longer than 150 days after the date of termination.

One or more of the stages of nationalization may have resulted in the change of control of the Fortis advisers and an assignment of their advisory agreements. Each of the boards of the SEC-registered investment companies met in person or by teleconference within 10 business days of the termination event and approved a continuance of the advisory agreements with respect to the nationalization.

Given the speed of the transactions and the highly unusual circumstances which involved three national governments, Fortis explained that it was not practical for the investment company boards to meet in person to approve the continuations prior to the termination of the advisory agreements. The transactions were triggered by emergency measures brokered by sovereign states in an effort to prevent the collapse of a major financial institution and stem the worldwide financial crisis.

Fortis asked the staff to grant relief with respect to shareholder meetings out of concern that the solicitation of mutual fund shareholder proxies would confuse shaken investors further and lead to needless redemptions. The costs associated with soliciting proxies and holding a shareholder vote outweighed the potential benefits, according to Fortis. Fortis assured the staff that a proxy statement will be prepared and shareholder votes will be obtained in connection with a sale of certain assets to BNP Paribas.

The staff granted the relief in part because management personnel was left in place to restore confidence in the business and eventually return it to the private sector. The nationalization did not result in any substantive changes to the terms of the advisory agreements or the day-to-day personnel providing services under the agreements. Shareholders have been advised of the nationalization by supplements to the funds' prospectuses or by letter.

Under the circumstances, the staff agreed that Fortis advisers may continue to serve the funds under a continuance without prior in-person approval by the board and without approval by a majority of the funds' outstanding voting securities.