November 18, 2020
The SEC recently adopted Rule 18f-4 (Rule), and rule and form amendments under the Investment Company Act of 1940, as amended (1940 Act), designed to provide a modernized and comprehensive approach to the regulation of the use of derivatives and other financial instruments by registered investment companies and business development companies (funds).
The Rule permits a fund to enter into certain derivatives and financial commitment transactions notwithstanding the limitations of Section 18 of the 1940 Act, provided certain conditions are met. For derivatives transactions, the Rule generally requires a fund to:
The release adopting the amendments (Adopting Release) also includes amendments to Rule 6c-11 under the 1940 Act (which permits most exchange-traded funds (ETFs) to operate without obtaining an exemptive order) to cover certain leveraged or inverse ETFs.
This Seward & Kissel client memorandum discusses the Rule and other amendments included in the Adopting Release in more detail: Please Click Here
The Adopting Release is available: Please Click Here
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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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