Investment Advisory Contract Approval

Investment advisory contract approval under Investment Company Act § 15(c) requires a registered investment company’s board to request and evaluate all information reasonably necessary to approve the advisory contract, then approve it initially and renew it annually. Your job is to run a repeatable board process that documents the factors reviewed, the independent directors’ separate vote, and the rationale for the decision. (15 U.S.C. § 80a-15(c))

Key takeaways:

• The board must request and evaluate “all information reasonably necessary” before approving or renewing the advisory contract. (15 U.S.C. § 80a-15(c))
• Approval is both initial and annual, and it must include a majority of independent directors voting separately. (15 U.S.C. § 80a-15(c))
• Operational success is about evidence: a complete 15(c) information package, minutes that show deliberation, and an auditable approval calendar. (15 U.S.C. § 80a-15(c))

“Investment advisory contract approval requirement” is not a generic governance concept. Under Section 15(c), the registered investment company’s board has a specific statutory duty: request and evaluate all information reasonably necessary to approve the advisory contract, including a focused evaluation of the adviser’s services and compensation, and then approve the contract at the outset and renew it annually. (15 U.S.C. § 80a-15(c))

For a CCO or GRC lead, the pressure point is operational: you must translate that legal standard into a board-ready workflow that runs on a predictable schedule, produces consistent materials, and leaves a clean record. Examiners and auditors typically do not accept “the board reviewed the contract” as a sufficient control statement. They look for (1) a defined process for gathering and presenting the information the board needs, (2) meeting materials that map to the factors the board should consider, and (3) minutes and resolutions that show the independent directors’ separate approval and the basis for the decision. (15 U.S.C. § 80a-15(c))

This page gives you requirement-level implementation guidance you can put into your compliance calendar, board materials checklist, and evidence repository immediately.

Regulatory text

Section 15(c) requires that a registered investment company’s board of directors evaluate and approve the investment advisory contract, including a specific evaluation of the adviser’s services and compensation. The board must request and evaluate all information reasonably necessary to approve the contract, considering factors such as the nature and quality of services, investment performance, fee comparisons, profitability to the adviser, and economies of scale. The contract must be approved initially and renewed annually by the board, including a majority of independent directors voting separately. (15 U.S.C. § 80a-15(c))

What the operator must do: build a board process that (a) collects and presents a complete 15(c) information set, (b) gives directors time and structure to evaluate it, and (c) captures the decision (including the independent directors’ separate vote) with documentation that can survive scrutiny. (15 U.S.C. § 80a-15(c))

Plain-English interpretation

Section 15(c) is a governance control over advisory fees and services. The board is not rubber-stamping management’s recommendation; it must actively seek the information needed to judge whether the advisory arrangement is appropriate and then document its approval.

“Request and evaluate all information reasonably necessary” is the operational standard you must meet. In practice, that means you should:

• Define what information is required each cycle and who owns it.
• Provide a structured evaluation format (so directors can compare year-over-year, and funds within a complex).
• Ensure the independent directors have a separate vote and that the minutes clearly record it. (15 U.S.C. § 80a-15(c))

Who it applies to (entity and operational context)

In scope entities

• Registered investment companies (for example, registered funds) with an investment advisory contract that requires board approval and renewal. (15 U.S.C. § 80a-15(c))

In scope roles and functions

• Fund board and board chair
• Independent directors (and independent counsel, where applicable, as a governance practice)
• Adviser relationship owner (often fund administration, adviser compliance, or legal)
• Fund CCO (or equivalent) coordinating materials and evidence
• Finance/product teams preparing fee comparisons and profitability views

Typical operational moments when this requirement triggers

• Launch of a new fund or strategy (initial contract approval). (15 U.S.C. § 80a-15(c))
• Annual contract renewal cycle (renewal approval). (15 U.S.C. § 80a-15(c))
• Material contract changes, fee schedule changes, or change in adviser services (treated as a re-approval event in many governance programs, consistent with the “reasonably necessary information” duty). (15 U.S.C. § 80a-15(c))

What you actually need to do (step-by-step)

1) Put the approval and renewal dates under calendar control

Create a “15(c) approvals” calendar that ties each fund to:

• Contract effective date
• Next renewal window
• Board meeting date when 15(c) will be actioned
• Material preparation due dates (board book lock, legal review, internal sign-offs)

Operator tip: treat the calendar as a control artifact. If the calendar is incomplete, everything else becomes ad hoc and hard to evidence.

2) Define a standard 15(c) information package (board book module)

Section 15(c) requires consideration of specific factors. Translate them into a repeatable set of board materials that map directly to the statutory themes: nature/quality of services, performance, fee comparisons, adviser profitability, and economies of scale. (15 U.S.C. § 80a-15(c))

A practical package structure:

• Services overview: what the adviser does, any changes since last approval, service level issues, staffing, and resources (nature/quality). (15 U.S.C. § 80a-15(c))
• Performance materials: relevant performance context so directors can evaluate outcomes as part of the decision (investment performance). (15 U.S.C. § 80a-15(c))
• Fee and expense comparisons: peer comparisons, share class considerations, breakpoints, and total cost context (fee comparisons). (15 U.S.C. § 80a-15(c))
• Adviser profitability analysis: a summary of profitability to the adviser related to the relationship (profitability). (15 U.S.C. § 80a-15(c))
• Economies of scale: growth trends, whether savings are shared through breakpoints or other mechanisms (economies of scale). (15 U.S.C. § 80a-15(c))
• Draft resolutions: approval language that includes independent directors’ separate approval requirement. (15 U.S.C. § 80a-15(c))

3) Run internal pre-clearance before directors see materials

Set up an internal review path for the 15(c) module:

• Legal checks contract versions, renewal mechanics, and resolution language.
• Compliance checks consistency with disclosures and any known service issues.
• Finance checks fee math, profitability summaries, and comparison methodology.

Avoid late-stage corrections. Corrections after board distribution raise process risk and can complicate the record.

4) Ensure the board process supports real evaluation

Structure the agenda so directors can ask questions and request follow-up information. Section 15(c) requires the board to request and evaluate what is reasonably necessary; your process should make it easy for directors to do that. (15 U.S.C. § 80a-15(c))

Concrete practices that help:

• A “15(c) questions log” that captures director questions, management responses, and any follow-ups delivered after the meeting.
• A clear “what changed since last year” section to focus deliberation on deltas.

5) Execute approval with the independent directors’ separate vote

The statute requires that approval/renewal include a majority of independent directors voting separately. (15 U.S.C. § 80a-15(c))

Operationalize this in two places:

• Agenda mechanics: a recorded segment for independent directors’ vote (and any executive session, if used as a governance practice).
• Minutes and resolutions: explicit language that the independent directors voted separately and approved by the required majority. (15 U.S.C. § 80a-15(c))

6) Lock the record and retain evidence in an audit-ready repository

After the meeting:

• Finalize and approve minutes on the board’s standard timeline.
• Store the final executed contract and any amendments.
• Store the final board materials (not drafts), plus the questions log and any supplemental memos.

If you use Daydream to run third-party and governance workflows, treat the adviser as a high-impact third party relationship and store the 15(c) package, approvals, and renewal calendar in the same system you use for evidence collection, task assignment, and board-reporting support. That reduces “lost in email” risk and keeps artifacts tied to the control.

Required evidence and artifacts to retain

Keep artifacts that prove both process and substance:

Process evidence

• 15(c) approval/renewal calendar and ownership
• Board agenda showing 15(c) item
• Distribution record or board portal posting record for the 15(c) package
• Director questions log and management responses (where applicable)

Substance evidence

• Final 15(c) information package mapping to the required factors (services/compensation, performance, fee comparisons, profitability, economies of scale). (15 U.S.C. § 80a-15(c))
• Board minutes describing deliberation and capturing approval
• Resolution showing board approval and independent directors’ separate majority vote. (15 U.S.C. § 80a-15(c))
• Executed advisory contract and any amendments

Common exam/audit questions and hangups

Expect reviewers to test whether your record demonstrates the statutory elements, not just that a meeting occurred:

• “Show me the materials the board relied on for the advisory contract renewal.” (15 U.S.C. § 80a-15(c))
• “Where do the minutes reflect the independent directors’ separate vote?” (15 U.S.C. § 80a-15(c))
• “How did the board evaluate services and compensation specifically?” (15 U.S.C. § 80a-15(c))
• “What information did the board request that was not in the initial package, and how was it resolved?” (15 U.S.C. § 80a-15(c))
• “How do you ensure annual renewal does not slip?” (15 U.S.C. § 80a-15(c))

Hangups usually arise when the board book is not clearly mapped to the 15(c) factors, or the minutes are too generic to evidence evaluation.

Frequent implementation mistakes and how to avoid them

1. Generic minutes that only state ‘reviewed and approved.’
   Fix: use a minutes template that references the categories of information reviewed and records the independent directors’ separate vote. (15 U.S.C. § 80a-15(c))

2. Inconsistent fee comparison methodology year over year.
   Fix: document the methodology in the board materials so directors can interpret changes and ask informed questions. (15 U.S.C. § 80a-15(c))

3. Profitability and economies of scale treated as optional.
   Fix: make them standard sections in the 15(c) module with clear ownership and review.

4. Late delivery of board materials.
   Fix: enforce a board book “lock” date and use a checklist that prevents last-minute substitutions.

5. No centralized evidence file.
   Fix: keep a single “15(c) record” per fund per cycle in your system of record (board portal, GRC tool, or a controlled repository). Daydream can help by assigning owners, tracking approvals, and retaining immutable artifacts tied to the renewal event.

Enforcement context and risk implications

No public enforcement cases were provided in the source catalog for this requirement, so you should treat enforcement context as a general risk lens rather than a case-study checklist.

Operational risk is straightforward:

• If you cannot prove the board requested and evaluated reasonably necessary information, you risk failing the statutory process test. (15 U.S.C. § 80a-15(c))
• If the independent directors’ separate vote is missing from the record, approval mechanics can be challenged. (15 U.S.C. § 80a-15(c))
• Weak documentation increases the chance that routine governance decisions become escalations during exams, audits, or board disputes.

Practical execution plan (30/60/90)

Use this as a staged rollout; treat the time boxes as phases, and align to your board schedule.

First 30 days (Immediate stabilization)

• Inventory all advisory contracts, effective dates, renewal timing, and responsible owners.
• Build the 15(c) approval/renewal calendar and confirm the next meeting date where action is required.
• Draft a standard 15(c) board package outline mapped to the statutory factors. (15 U.S.C. § 80a-15(c))
• Create minutes and resolution templates that capture the independent directors’ separate vote. (15 U.S.C. § 80a-15(c))

Next 60 days (Build the machine)

• Assign data owners for each section (services, performance, fees, profitability, economies of scale).
• Pilot the package for one fund or one renewal cycle; capture director questions and refine.
• Stand up the evidence repository structure ¹ and implement access controls and versioning.

Next 90 days (Operationalize and audit-proof)

• Roll out the standardized package across all funds in scope.
• Implement a pre-board internal review checklist and sign-off workflow.
• Add a post-meeting closeout checklist (minutes finalized, resolution executed, artifacts stored, follow-ups closed).

Frequently Asked Questions

Do we need a formal checklist for Section 15(c), or is a board memo enough?

A checklist is the easiest way to prove you consistently covered the required factors and that the board received reasonably necessary information. A memo can work, but it must still map to the evaluation points required by Section 15(c). (15 U.S.C. § 80a-15(c))

What does “independent directors voting separately” mean in practice?

Your minutes and resolutions should show a distinct vote by the independent directors that meets the “majority of independent directors” threshold. Build it into the agenda mechanics so it is not an afterthought. (15 U.S.C. § 80a-15(c))

How detailed do board minutes need to be?

Minutes should reflect what information categories were reviewed and that directors deliberated and asked questions where relevant, plus the separate independent vote. Avoid one-line approvals that do not evidence evaluation. (15 U.S.C. § 80a-15(c))

If the advisory fee schedule doesn’t change, do we still need a full 15(c) review annually?

Yes. Section 15(c) requires annual renewal approval, and the board must still request and evaluate reasonably necessary information to support that renewal decision. (15 U.S.C. § 80a-15(c))

Can we reuse last year’s materials?

You can reuse structure and baseline content, but the package should be refreshed with current services, performance context, fee comparisons, profitability, and economies of scale considerations. The board’s evaluation must reflect current information. (15 U.S.C. § 80a-15(c))

Where should we store 15(c) artifacts for exams?

Store them in a controlled repository tied to the specific fund and renewal cycle: final board book module, executed contract, minutes, resolutions, and the Q&A log. If you already manage third-party relationship evidence in Daydream, keeping the 15(c) record there improves retrieval and audit readiness.

Footnotes

1. 15 U.S.C. § 80a-15(c)