At its meeting yesterday, the FASB received an update from its staff on the status of the consolidation project, including the results of the staff’s outreach with various constituents in connection with the Board’s decisions at its December 2014 meeting. The staff indicated that on the basis of its outreach, the rights afforded shareholders (e.g., voting on the asset manager’s compensation, approving the overall investment strategy, and removing the manager) for most series fund structures under the Investment Company Act of 1940 (the “1940 Act”) are at the individual series level rather than the overall trust level. The staff indicated that this is consistent with the example to be included in the FASB’s forthcoming Accounting Standards Update (ASU), in which the holders of equity at risk in a series fund are deemed to have the ability to direct the activities that most significantly affect the series fund’s economic performance (i.e., they meet the “power” criterion). However, the staff also indicated that many funds established in foreign jurisdictions may not meet this criterion.

In addition, the FASB indicated that it will provide language in the ASU’s basis for conclusions stating that each individual series fund in a trust that is regulated under the 1940 Act should be considered a separate legal entity in the consolidation analysis (i.e., in the assessment of the “sufficiency of equity” criterion). 

The FASB also confirmed that it intends to issue the ASU in February 2015.