Disclosure of Divestment by Registered Investment Companies in Accordance with Section 13(c) of the Investment Company Act

A Small Entity Compliance Guide¹

Introduction

Section 13(c) of the Investment Company Act was added by the Sudan Accountability and Divestment Act of 2007 and amended by the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. It provides that no person may bring any civil, criminal, or administrative action against any registered investment company, or any employee, officer, director, or investment adviser of the investment company, based solely upon the investment company divesting from, or avoiding investing in, securities issued by persons that the investment company determines, using credible information that is available to the public, conduct or have direct investments in certain business operations in Sudan or engage in certain investment activities in Iran. This limitation on actions does not apply to a registered investment company, or any of its employees, officers, directors, or investment advisers, unless the investment company makes disclosures about the divestments in accordance with regulations prescribed by the SEC.

Disclosure of Divestments in Accordance with Section 13(c)

Each registered investment company that divests securities in accordance with Section 13(c) is required to disclose the divestment in the next Form N-CSR or Form N-SAR that it files following the divestment. Management investment companies will provide this disclosure on Form N-CSR, and unit investment trusts will provide it on Form N-SAR. A registered investment company that divests securities in accordance with Section 13(c) during the period that begins on the fifth business day before the date of filing a Form N CSR or Form N-SAR and ends on the date of filing may disclose the divestment in either that filing or an amendment thereto. The amendment must be filed not later than five business days after the date of filing the Form N CSR or Form N-SAR.

The following information must be disclosed regarding the securities divested: the issuer's name; exchange ticker symbol; CUSIP number; total number of shares or, for debt securities, principal amount divested; and dates that the securities were divested. The name of the statute that added the provision of Section 13(c) in accordance with which the securities were divested (i.e., the "Sudan Accountability and Divestment Act" or the "Comprehensive Iran Sanctions, Accountability, and Divestment Act") must also be disclosed. In addition, if the registered investment company continues to hold any securities of the divested issuer, it is required to disclose the exchange ticker symbol; CUSIP number; and total number of shares or, for debt securities, principal amount of such securities, held on the date of filing.

For purposes of determining when a divestment should be reported, if a registered investment company divests its holdings in a particular security in a related series of transactions, the company may deem the divestment to occur at the time of the final transaction in the series. A registered investment company is not required to disclose divestments of securities of an issuer, but the limitation on actions provided in Section 13(c) will not apply with respect to a divestment that is not disclosed.

Other Resources

The adopting release for disclosure of divestment by registered investment companies in accordance with the Sudan Accountability and Divestment Act of 2007 can be found on the SEC's website at http://www.sec.gov/rules/final/2008/34-57711.pdf.

The adopting release for the technical amendments to our disclosure forms in connection with the amendments to Section 13(c) of the Investment Company Act that were included in the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 can be found on the SEC's website at http://www.sec.gov/rules/final/2010/34-63087.pdf.

Form N-CSR and Form N-SAR can be accessed through the "Investment Management" section of the SEC's website at http://www.sec.gov/divisions/investment.shtml.

Contacting the SEC

The SEC's Division of Investment Management is happy to assist small companies with questions regarding disclosure of divestment by registered investment companies in accordance with Section 13(c) of the Investment Company Act. The Division's Office of Chief Counsel answers questions submitted by e-mail and telephone. You can submit a question by e-mail to imocc@sec.gov and a staff member of the office will call you to discuss your question. In addition, you can contact the Office of Chief Counsel at (202) 551-6825.

Endnotes

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¹ This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a "small entity compliance guide" under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains rules adopted by the SEC, but is not a substitute for any rule itself. Only the rule itself can provide complete and definitive information regarding its requirements.

http://www.sec.gov/rules/final/2010/34-63087-secg.htm