Dechert Files a Comment Letter in Response to the SEC Derivatives Rule Proposal
On March 24, 2020, Dechert LLP filed a comment letter in response to the SEC’s proposed rule regarding the regulation of registered funds' and BDCs’ use of derivatives and other transactions that raise "senior securities" issues under Section 18 of the Investment Company Act of 1940.
Capitalizing on Dechert’s extensive practical experience advising funds and BDCs on their use of derivatives and compliance with the relevant provisions of the Investment Company Act, the comment letter, among other items, highlights the complexity of complying with the proposed limit on fund leverage risk and proposes changes thereto, discusses potential burdens associated with the implementation of a derivatives risk management program, and recommends various changes to the limited derivatives user exception.
Additional topics the comment letter covers include the proposed treatment of money market funds, reverse repurchase agreements, and similar financing transactions under Section 18, the proposed new sales practice rules for leveraged/inverse funds, changes to reporting and public disclosure requirements, and the potential timing of the compliance dates for any rule changes.
Authored by Phil Hinkle, Mark Perlow, Susan Grafton, Brenden Carroll, Audrey Wagner, Ashley Rodriguez, Nadeea Zakaria, Katherine Shorey, Nicholas Ward and Marylyn Harrell.