Today, the Investment Adviser Association published the attached article (Link to Article Dealing with the New Derivatives Rule) in its September 2021 IAA Newsletter.

At a high level, the article:

  • Provides a background on the limitations on senior securities under the Investment Company Act of 1940 (the “1940 Act“);
  • Affords readers with an overview of Rule 18f-4 under the 1940 Act;
  • Summarizes how a fund qualifies as a limited derivatives fund (includes a six-step process for calculating derivatives exposure); and
  • Describes the key elements of a derivatives risk management program that is required to be implemented by a fund that does not qualify as a limited derivatives fund (i.e., a VaR Fund).

We are grateful for the opportunity to have contributed the article to the IAA Newsletter.

Good day.  Good to focus on Rule 18f-4 issues, since the August 19, 2022 compliance date will be hear before we know it. DR2