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A Divided SEC (Finally) Adopts Sweeping Rule Governing Fund Use of Derivatives  (Volume 54, Number 19—November 10, 2021)

Author:  Jay G. Baris.

Source: Volume 54, Number 19, November 1 2021 , pp.229-240(12)

Review of Securities & Commodities Regulation


The SEC’s new rule requires mutual funds (with some exceptions) that use more than a limited amount of derivatives to adopt a comprehensive derivatives management program, designate a board-approved derivatives risk manager, and not exceed a designated maximum outer limit on leverage based on value at risk. The author discusses the background and provisions of the new rule in detail. He notes that the Commission did not adopt its proposed and controversial sales practice rules for leveraged/inverse funds.

Keywords: Rule 18f-4; Leveraged/Inverse Investment Vehicles; Derivatives Risk Management Program; Relative and Absolute VaR Tests; Reverse Repurchase Agreements; Unfunded Commitment Agreements

Affiliations:  1: Sidley Austin LLP.

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