The Securities and Exchange Commission issued a release on Dec. 11, 2015 proposing a new rule that would establish new limitations on the use of derivatives by registered investment companies and business development companies under the Investment Company Act of 1940. Proposed Rule 18f-4 would also regulate other trading practices of such funds, including short sales of securities, that are deemed to involve the issuance of “senior securities.” Hedge funds and other private investment funds would not be subject to the rule.
Click here to read this article, in which SRZ partners Kenneth S. Gerstein and John J. Mahon and special counsel Pamela Poland Chen and associate Karen Spiegel review the requirements of the proposed rule, which is intended to provide a clearer regulatory framework applicable to the use of derivatives by regulated funds.