In a February 13, 2014 no-action letter, the SEC staff granted relief requested by Nuveen Investment Funds, Inc., Nuveen Fund Advisors, LLC (“Nuveen Advisors”), and U.S. Bank National Association (“U.S. Bank,”and collectively with Nuveen Investment Funds, Inc. and Nuveen Advisors, “Nuveen”) to allow U.S. Bank, the custodian and securities lending agent for certain funds advised by Nuveen Advisors, to negotiate the interest rates charged to broker-dealers and other borrowers in connection with loans of the funds’ securities (the “Rebate Rates”). Section 17(e)(1) of the 1940 Act prevents persons who are affiliated with a fund (or affiliated with such affiliated persons) from accepting compensation for the purchase or sale of any property  to or for a fund. A bank that provides custody of fund assets may be deemed to be an affiliated person of that fund if it acquires ownership or control of specified amounts of the voting securities of that fund through its other investment management activities. In Norwest Bank Minnesota, N.A., SEC Staff No-Action Letter (publicly available May 25, 1995) (the “Norwest Letter”), the SEC staff granted relief that permits an affiliated custodian to receive compensation for providing certain services as securities lending agent. Among other things, the Norwest Letter allows a fund’s investment adviser to delegate to the securities lending agent the task of entering into loans with pre-approved borrowers on pre-approved terms.

In its application letter, Nuveen stated that it is generally not practicable for the bank, in its capacity as securities lending agent, to submit the Rebate Rates to the adviser for pre-approval as required under the Norwest Letter and that it is not industry practice to do so. Nuveen argued that pre-approval of the Rebate Rates from the adviser is not needed to protect the funds’ shareholders due to the protections afforded by securities lending procedures that have been put in place to ensure that the Rebate Rates are being set by the custodian in line with prevailing market conditions. The SEC indicated that it generally agreed with Nuveen’s position and granted the relief requested, subject to the conditions described in the Nuveen no-action letter. In addition, the SEC staff affirmed its view that relief from Section 17(e)(1) of the 1940 Act is “inappropriate” when the lending agent retains full discretion to negotiate loan terms.