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(Article from Registered Funds Regulatory Update, April 2022)

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On March 28, 2022, William Birdthistle, SEC Division of Investment Management Director, gave remarks at the ICI Investment Management Conference where he touched on the fact that no plaintiff has ever won a Section 36(b) case. He highlighted that Section 36(b) of the Investment Company Act is not limited to shareholder actions, noting that the provision also gives the SEC the right to bring an action against a fund adviser that has allegedly breached its fiduciary duty, but only with respect to the receipt of compensation. The fact that no plaintiff has ever won a Section 36(b) case left Birdthistle questioning “whether the duty enacted in the statute is truly being honored [if no adviser can lose].” His remarks have left the industry questioning the intent of his remarks and whether the SEC may start bringing actions under Section 36(b).

William Birdthistle, SEC Director of Division of Investment Management, Speech, Remarks at the ICI Investment Management Conference (Mar. 28, 2022), available at: https://www.sec.gov/news/speech/birdthistle-remarks-ici-investment-management-conference-032822.