Compliance and CCO Oversight

In 2004, the U.S. Securities and Exchange Commission adopted Rule 38a-1 under the Investment Company Act of 1940—the fund compliance program rule—which provides fund boards with tools for overseeing compliance and assigns them specific responsibilities relating to the compliance function. Among other responsibilities, the board approves the fund’s policies and procedures, as well as those of the fund’s adviser, principal underwriter, administrator, and transfer agent. The board also approves the designation, compensation, and removal of a fund chief compliance officer (CCO).

At least once a year, the CCO must provide a written report to the board that, at a minimum, addresses the operation of the fund’s policies and procedures and each material compliance matter that occurred since the date of the last report. The CCO also must meet in executive session with the fund’s independent directors at least once a year.