Section 3(c)(10)(A)(ii) of the Investment Company Act of 1940 generally exempts a private investment fund from registering as an investment company if it is maintained by a charitable organization and is organized and operated exclusively for religious, education, benevolent, fraternal, chartable or reformatory purposes (“Permitted Purposes”) for the collective investment and reinvestment of certain assets.  Recently, the SEC provided new guidance to alleviate concerns related to the use of this exemption.

The SEC’s Division of Investment Management clarified that a private investment fund that is a legal entity distinct from the charitable organization[1] maintaining the fund and that is organized and operated for the purpose of earning investment returns for charitable organizations will be able to use the exclusion under Section 3(c)(10)(A)(ii).  A fund must still conform to the other conditions Section 3(c)(10) and the staff’s corresponding existing no-action positions.

The staff recognized that a fund technically might