Published on Dec 6th, 2019 |

The Securities and Exchange Commission has voted to propose a new rule designed to enhance the regulation of the use of derivatives by registered investment companies, including mutual funds, exchange-traded funds, and closed-end funds, as well as business development companies.


“Funds frequently use derivatives to gain exposure to certain asset classes more efficiently and to mitigate risks, but in certain cases derivatives can heighten risks to investors and markets, including risks related to leverage. By standardizing the framework for funds’ derivatives risk management, the proposal would benefit investors, funds and our markets, including by providing for more-effective risk management across funds and enhanced investor protections.”


In view of the proposal’s updated, comprehensive approach to the regulation of funds’ derivatives use, the Commission proposed to rescind a 1979 General Statement of Policy, which provides Commission guidance on how funds may use certain derivatives and derivatives-like transactions in light of section 18’s restrictions.


Read the full release here…