View or download a PDF of the letter here.
The Americans for Financial Reform Education Fund today submitted a comment opposing a proposal by the New York Stock Exchange and the Securities and Exchange Commission that would end annual shareholder meetings for closed-end funds.
Closed-end funds raise money initially from investors, many of whom are mom and pop retail investors. Investors who do not participate in the original capital raise can later buy the fund using their brokerage firm at a price at either a premium or discount to the value of all of the fund’s assets (Net Asset Value).
Since any new money does not go to the closed-end fund’s manager, who needs to purchase new assets, or similarly sell assets to meet investor sales, similar to an open-end fund, closed-end funds can invest in more illiquid, opaque private market assets.
AFREF raises concerns that the lack of shareholder meetings takes away shareholders ability to raise issues around fund governance or the valuations of private market assets. This is especially pertinent as a number of closed-end fund managers have supported legislation such as H.R. 2799, the Expanding Access to Capital Act, to allow funds to hold 100% of their fund in private markets assets, up from 15% currently.