SEC Division of Investment Management staff letter: First Trust/Gallatin Specialty Finance and Financial Opportunities Fund

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF INVESTMENT MANAGEMENT
July 1 1,2008
Our Ref. No. 200871 1856
First TrustIGallatin Specialty Finance and
Financial Opportunities Fund
File No. 8 1 1-22039
Your letter dated July 10,2008 requests our assurance that we would not recommend enforcement action to the Securities and Exchange Commission ("Commission") under section 15(a) of the Investment Company Act of 1940 (the "1 940 Act") against First TrustIGallatin Specialty Finance and Financial Opportunities Fund (the "Fund"), First Trust Advisors L.P. (the "Adviser") or any sub-adviser that succeeds the Fund's current sub-adviser (the "Successor Sub-adviser") if, under the circumstances described below, the Fund and the Adviser enter into an interim sub-advisory agreement with the Successor Sub-adviser that has not been approved by the vote of a majority of the outstanding voting securities of the Fund. BACKGROUND You state the following: The Fund, a Massachusetts business trust, is registered as a closed-end investment company under the 1940 Act. The Adviser, an investment adviser registered under the Investment Advisers Act of 1940 ("Advisers Act"), serves as the Fund's investment adviser pursuant to an investment management agreement that authorizes the Adviser to retain a sub-adviser at its own cost to provide advisory services to the Fund. Gallatin Asset Management, Inc. ("Gallatin"), an investment adviser registered under the Advisers Act, currently serves as a sub-adviser to the Fund pursuant to a sub-advisory agreement that was approved by the Fund's shareholders on February 20,2008 ("Existing Sub-advisory Agreement"). Under its terms, the Existing Sub￾advisory Agreement may be terminated by Gallatin upon sixty days written notice to the Fund and the Adviser. On June 2,2008, Gallatin notified the Fund and the Adviser of its resignation as sub-adviser to the Fund ("Resignation"). Gallatin indicated that, following personnel changes within its equity team, it had conducted an internal review of its capabilities and resources and determined that it was in the best interests of Fund shareholders and Gallatin to resign. The Resignation will terminate the Existing Sub-advisory Agreement on July 3 1,2008 (the "Effective Date"). The Resignation was not foreseen by the Fund or the Adviser. The Fund and the Adviser are currently seeking a Successor Sub-adviser. ANALYSIS
Section 15(a) of the 1940 Act prohibits a person fi-om serving as an investment
adviser to a registered investment company except pursuant to a written contract that has been approved by the vote of a majority of the outstanding voting securities of the