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Use of Derivatives by Registered Investment Companies and Business Development Companies Proposal

Issue

OTC Derivatives→

Summary

SIFMA AMG provided comments to the Securities and Exchange Commission (SEC) on use of Derivatives by Registered Investment Companies and Business Development Companies; Required Due Diligence by Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles, File No. S7-24-15.

AMG is supportive of the framework underlying the Proposed Derivatives Rule and the SEC’s proposal to incorporate sound risk management principles into regulation of Funds’ use of derivatives and other transactions. AMG also believes that if the Proposed Derivatives Rule were revised to provide additional flexibility and legal certainty in the ways suggested in our letter, the Proposed Derivatives Rule would accomplish the SEC’s goals while allowing Funds to be efficiently and prudently managed in accordance with their disclosed investment strategies and risk factors.

PDF

Submitted To

SEC

Submitted By

SIFMA AMG

Related Committee(s)

  • Asset Management

Date

21

April

2020

Excerpt

Via electronic mail ([email protected])

April 21, 2020

Ms. Vanessa Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090

Re: Use of Derivatives by Registered Investment Companies and Business Development Companies; Required Due Diligence by Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles, File No. S7-24-15

Dear Ms. Countryman:

The Asset Management Group (“AMG”) of the Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to provide comments to the U.S. Securities and Exchange Commission (the “SEC”) on re-proposed rule 18f-4 (the “Proposed Derivatives Rule”) under the Investment Company Act of 1940, as amended (the “1940 Act”), proposed amendments to Forms N-PORT, Form N-LIQUID (to be re-titled “Form N-RN”) and Form N-CEN, under the 1940 Act, proposed changes to rule 6c-11 under the 1940 Act and adoption of proposed rules 15l-2 under the Securities Exchange Act of 1934, as amended and Rule 211h-1 under the Investment Advisers Act of 1940, as amended (rules 15l-2 and 211h-1, the “Proposed Sales Practices Rules” and together with the Proposed Derivatives Rule, the “Proposed Rules”).2 The Proposed Derivatives Rule would limit the ability of business development companies (“BDCs”) and registered investment companies (together, “Funds” and each a “Fund”) to enter into derivatives transactions, reverse repurchase transactions (“Reverse Repos”) and similar transactions, by reference to specified thresholds and would require Funds, other than limited derivatives users and certain other excluded Funds, to establish a comprehensive risk management program.

 

1 SIFMA AMG’s members represent U.S. asset management firms whose combined global assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS, and private funds such as hedge funds and private equity funds.
2 See Use of Derivatives by Registered Investment Companies and Business Development Companies; Required Due Diligence by Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles, 85 Fed. Reg. 4446 (Jan. 24, 2020), available at https://www.govinfo.gov/content/pkg/FR-2020-01-24/pdf/2020-00040.pdf (the “Proposing Release”).

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