SEC proposes overhaul of interval fund rule and multi-class relief

The Securities and Exchange Commission proposed on 5 October 2026 to modernize rule 23c–3, the framework for interval funds, and to extend multiple share class structures to all registered closed-end funds and business development companies. The proposal was published in the Federal Register of 5 October 2026 (Vol. 91, No. 191, Proposed Rules, p. 63388) under Release Nos. 33–11444, 34–106534 and IC–36351, File No. S7–2026–34, RIN 3235–AN83. Comments must be received on or before 4 December 2026.

Rule 23c–3, adopted in 1993 under the Investment Company Act of 1940, allows regulated closed-end funds to make periodic repurchase offers to shareholders at net asset value pursuant to a fundamental policy. The Commission argues the rule has stayed largely unchanged while its market has grown: as of December 2025, 139 interval funds held net assets of $101 billion, and the number and net assets of interval funds have risen by approximately 407 percent and 545 percent respectively since 2016. Credit strategies account for about 55 percent of aggregate interval fund net assets.

The proposal follows a 2017 report by the U.S. Department of the Treasury and a 2019 Commission concept release on the exemptive framework. The Commission has issued approximately 230 exemptive orders for unlisted continuously offered regulated closed-end funds, and about 200 orders for open-end multi-class structures in the decade after 1985.

Repurchase flexibility

The amendments would let an interval fund defer its first repurchase offer for up to two years after registration or after a shareholder vote adopting the fundamental policy. A one-month periodic interval would be added to the existing three-, six- and twelve-month options, and discretionary repurchases would be permitted once every twelve months instead of once every two years.

The proposal would also simplify the definition of repurchase pricing date, remove the requirement to state in the fundamental policy the maximum number of days between the repurchase request deadline and the pricing date, and allow interval funds to deduct deferred sales loads from repurchase proceeds subject to conditions. The five-to-25-percent range for repurchase offer amounts would apply only to periodic repurchases, and the treatment of oversubscribed offers would be streamlined.

Liquidity and disclosure

The rule’s requirement that an interval fund hold 100 percent of its repurchase offer amount in liquid assets during the offer period would be replaced by a principles-based standard: the fund must manage portfolio liquidity so that it can satisfy repurchase requests without selling investments at prices that deviate significantly from their value.

Disclosure changes include:

• A fees-and-expenses legend in the Form N–2 fee table for all regulated closed-end funds.
• An expense example in shareholder reports, with the hypothetical investment raised from $1,000 to $10,000.
• Multiple share class and master-feeder disclosures in Form N–2, and extension of Form N–CEN class reporting to registered closed-end funds.
• Removal of the 1993 grandparent clause and of superseded Form N–23c–3 filing procedures.

Multiple share classes

Rules 18f–3 and 17d–3 would be extended to regulated closed-end funds and BDCs, codifying relief now obtained case by case. Conditions would include:

• Common stock offered on a continuous basis.
• Any offer other than at net asset value made to all classes.
• No listing, offering or trading of the common stock on a secondary market.
• Asset-based distribution or service fees charged under a written plan complying with rule 12b–1.
• Repurchase offers made equally to all classes, with the percentage taken up allocated on a fund, not class, basis.
• Exchange offers complying with rule 11a–3, with interval fund shares exchanged counted in the repurchase offer amount.

The Commission proposes to rescind all but one of the exemptive orders covering these areas and to allow a one-year compliance period after the effective date.

Costs and reach

The Commission estimates aggregate annual cost savings of approximately $495,360 from fund complexes no longer seeking exemptive relief, alongside new compliance costs of $6,168 annually per Form N–2 filer and $605 per Form N–CEN filing. As of year-end 2025 there were 884 regulated closed-end funds — 706 registered closed-end funds and 178 BDCs — with net assets of $710 billion, and about 4.4 million U.S. households owned such funds in 2025.

The proposal would give retail investors a broader menu of semi-liquid vehicles for private credit, private equity and other alternative assets, while cutting the legal and administrative cost of launching monthly interval funds and multi-class structures. It would also shift the rule from prescriptive liquidity mandates to a principles-based standard, a trade-off the Commission itself asks commenters to weigh.

Source: Federal Register, Vol. 91, No. 191, 5 October 2026, Proposed Rules, p. 63388 (official reference: Release No. 33–11444; File No. S7–2026–34).