Simpson Thacher Discusses SEC Framework for Use of Derivatives by Regulated Funds

In a widely anticipated action that was years in the making, the SEC adopted Rule 18f-4 under the 1940 Act prior to the conclusion of former Chair Jay Clayton’s tenure.  The rule overhauls the regulatory framework for the use of derivatives and similar transactions by regulated funds, which for purposes of the rule includes registered closed-end funds, BDCs and registered open-end funds (including mutual funds and ETFs but excluding money market funds). Importantly, regulated funds can continue to follow the current asset segregation approach when investing in derivatives until the rule’s compliance date of August 19, 2022 (the “Compliance Date”).… Read more