SEC Withdraws and Modifies Certain Staff Letters in Light of Rule 18f-4

On November 2, 2020, the SEC adopted rule 18f-4 under the 1940 Act which will permit a registered investment company or business development company (fund) to enter into derivatives and certain other transactions notwithstanding the restrictions under Sections 18 and 61 of the 1940 Act, provided that the fund complies with the conditions of rule 18f-4. For more information on rule 18f-4, please see this linked S&K Memo.

In a recent Information Update, the staff of the SEC’s Division of Investment Management (staff) announced that it intends to withdraw and modify certain staff letters that will become moot, superseded or otherwise inconsistent with rule 18f-4. More specifically, the staff will fully withdraw letters that provide guidance regarding Section 18 asset segregation requirements with respect to specific transactions. In addition, the staff will modify certain letters that address Section 18 requirements and other issues for certain types of transactions, such as securities lending, to only withdraw staff statements within such letters that address Section 18 issues. The effective date for these withdrawals and modifications is August 19, 2022, which is also the compliance date for rule 18f-4.

A complete list of the staff letters that have been withdrawn or modified is included in Appendix A to the Information Update.