The SEC’s Division of Investment Management has issued an IM Guidance Update (the Series Companies Guidance Update) regarding transactions between a registered investment company that is a “series company” and its affiliates. A series company is a typical structure for open-end mutual funds in which a single corporation or state business trust is established under one set of organizational documents and a single board of directors or trustees and offers investors several separate investment portfolios (series) or funds within the series company. The SEC staff notes that the Series Companies Guidance Update was being issued to remind mutual funds that are series companies about the importance of ensuring that their compliance policies and procedures are reasonably designed to prevent violations of the federal securities laws with respect to each fund or series viewed separately. The SEC staff notes that such funds should review their compliance policies and procedures relating to transactions with affiliated persons that may be prohibited under the Investment Company Act of 1940, as amended (the 1940 Act). As an example of the type of compliance issue that can arise with respect to different series of a series company, the SEC staff cited Section 17(a) of the 1940 Act which, in part, generally prohibits an “affiliated person” of a mutual fund or an affiliated person of such a person from selling any security or other property to the mutual fund. Under the 1940 Act, an “affiliated person” of another person includes, among others, a person who owns 5% or more of the outstanding voting securities of such other person. The Series Companies Guidance Update states that the compliance policies and procedures of a series company should provide for the identification of persons owning 5% or more of the outstanding voting securities of each fund of the series company in order to monitor compliance with Section 17(a).1