SEC Considers New Rule to Regulate the Use of Derivatives by Registered Funds

Posted on January 6th, 2016 at 12:31 PM
SEC Considers New Rule to Regulate the Use of Derivatives by Registered Funds

From the Desk of Jim Eccleston at Eccleston Law LLC:

On December 11, the SEC approved the proposal of a new rule to limit the use of derivatives in registered mutual funds, exchange-traded funds, closed-end funds, and business development companies.  The rule would require firms using derivative to comply with one of two portfolio limitations. The limitations would limit the leverage ratio of funds due to derivatives.

The first alternative is based on exposure, requiring the fund to restrict its aggregate exposure to 150% of its net assets. The other, risk-based alternative would limit funds that pass a risk-based test to obtain exposure of up to 300% of their net assets. In addition to both alternatives, funds would be required to segregate assets in order to mitigate risk from derivatives. Funds that use derivatives frequently, or funds that use complex derivatives, would also be required to maintain a derivatives risk management program.

The SEC will engage comments for 90 days following publication in the Federal Register. 

The attorneys of Eccleston Law LLC represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today. 

 

Related Attorneys: James J. Eccleston

Tags: Eccleston, Eccleston Law, Eccleston Law LLC, James Eccleston, SEC

Return to Archive

TESTIMONIALS

Previous
Next

Fantastic news!!!!  Your professionalism, support and expertise were greatly appreciated.  You made a difficult situation much more bearable.

Marci M.

LATEST NEWS AND ARTICLES

January 21, 2022
CFP Board Establishes New Appeals Commission

The Certified Financial Planner (CFP) Board of Standards has established a new Appeals Commission. As the name suggests, the Appeals Commission possesses the sole authority to adjudicate appeal hearings.

January 20, 2022
Edward Jones Fails To Convince Supreme Court To Review Federal Preemption of Account Fee Suit

Edward Jones & Co. failed to convince the U.S. Supreme Court to analyze how a federal securities law impacts a client dispute pertaining to fee-based accounts.

January 19, 2022
SEC Charges Texas Entities Over Oil and Gas Fraud

The Securities and Exchange Commission (SEC) has charged The Heartland Group Ventures, Heartland Production and Recovery, six other Heartland-affiliated entities, four Heartland-affiliated individuals as well as several oil and gas operators.