This post continues our consideration of a carveout from the proposed Value at Risk (“VaR”) limitations of Rule 18f-4 for unfunded commitment agreements “because they do not present an opportunity for the fund to realize gains or losses between the date of the fund’s commitment and its subsequent investment ….” Our last post dealt with commitments to invest in a company’s equity. But the definition of “unfunded commitment agreement” would also include a contract…

Having completed our detour into regulations and interpretations other than re-proposed Rule 18f-4, this post returns to considering possible justifications for carving out “unfunded commitment agreements” from the proposed Value at Risk limitations of Rule 18f-4. We have previously explained why the first two justification identified in the proposing release are ill-founded. Read the full article on our sister blog Asset Management ADVocate.…

Not content with Steve’s detour into the relationship between Rule 2a-7 and re-proposed Rule 18f-4, we would also like to point out a set of rules under which the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have wrestled with the distinctions between “swaps, security-based swaps and security-based swap agreements” and non-derivative transactions. Release No. 33-9938 (the “Release”) not only adopted regulations distinguishing swaps from other types of derivatives instruments (such…

FINRA and the CFTC each issued recent advisories on commodity-linked exchange traded products. Directed at retail investors and broker-dealers, the advisories each highlighted certain issues unique to commodity-linked exchange traded products that were recently demonstrated by market reactions to fluctuating oil prices caused by the COVID-19 pandemic. The advisories provided guidance on relevant considerations in connection with oil-linked and commodity-linked exchange traded products. Read the full article here.…

On May 28, 2020, commissioners of the U.S. Commodity Futures Trading Commission (CFTC) unanimously voted to approve: (1) an interim final rule (IFR) that would defer the next phase of the compliance schedule for the initial margin (IM) requirements for uncleared swaps in response to operational challenges certain entities are facing due to the COVID-19 (coronavirus) pandemic; and (2) a proposed rule (Proposed Rule) which, if finalized, would amend the CFTC Regulation 3.10 exemption from registration…

3 Things About… This is an inaugural post in an occasional series that will attempt to distill a select current event to its essence. Consistent with the (arguably bland yet) very accurate name of our blog, the focus of this series will be on regulatory and transactional issues related to derivatives and repurchase agreements.  Our first topic is.. …The CFTC’s Proposed Amendments to Form CPO-PQR…

Re-Proposed Rule 18f-4: How Not to Distinguish Commitments from Derivatives is the second in a series of posts about the proposed treatment of so-called “unfunded commitment agreements” under re-proposed Rule 18f-4 under the Investment Company Act of 1940. We thank our colleague Stephen A. Keen, who originally published this post at our sister blog, the Asset Management ADVocate. Good day. Good to pause and think about commitments before we commit to a regulatory course…