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Useful Reference Materials for Compliance with the New Derivatives Rule for “Limited Derivatives Users”

As a reminder, the compliance date for Rule 18f-4—the SEC’s new derivatives rule for registered funds—is August 19, 2022.

Rule 18f-4 reflects a wholesale replacement of the existing asset segregation-based regulatory regime for mutual funds, closed-end funds, BDCs, EFTs and other registered funds that engage in derivatives transactions. The implementation and compliance burdens associated with the rule are significant; among other things, a fund relying on the rule must adopt a derivatives risk management program (DRMP) and generally must calculate new types of risk measurements, such as daily “value-at-risk” (VaR), at least weekly VaR backtesting and at least weekly stress testing.

Because the new rule also includes an exception for "limited derivatives users," and a significant number of funds and fund complexes may be eligible to rely on this exception, thereby avoiding the rule's requirements to adopt a DRMP and comply with the VaR-based limits, as well as the related board oversight and reporting requirements, Vedder Price has prepared reference materials for use by investment managers and fund complexes when considering the availability of the limited derivatives user exception. We are also circulating a link to the webinar—Practical Implications of the New Fund Derivatives Rule—hosted by Vedder Price attorneys Juan M. Arciniegas, Deborah Bielicke Eades, W. Thomas Conner and Nathaniel Segal, members of the firm’s Investment Services group.

© 2022 Vedder PriceNational Law Review, Volume XI, Number 333
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About this Author

Juan M. Arciniegas, Vedder Price, derivatives, structured products and futures
Shareholder

Juan M. Arciniegas is a Shareholder at Vedder Price and a member of the Investment Services group in the firm’s Chicago office.

Mr. Arciniegas works primarily as a derivatives lawyer and has significant experience in the market for over-the-counter (OTC) derivatives, structured products and futures. He advises on every stage throughout the life cycle of a derivatives transaction, from conducting pre-trade regulatory due diligence to negotiating transactional documentation and advising on post-trade reporting and recordkeeping obligations. This...

312-609-7655
Thomas Conner Investment Lawyer Vedder Price
Shareholder

W. Thomas Conner is a Shareholder in the Investment Services group in the firm’s Washington, DC office.

Mr. Conner has represented financial services companies, including mutual funds, exchange traded funds (ETFs), insurance companies issuing fixed and variable annuities, commodity pools and commodity pool operators and other types of financial services firms for over 25 years. His practice combines regulatory experience with an extensive knowledge of the mutual fund, ETF, commodity pool, variable contract and investment advisory services.

...
(202) 312 3331
Deborah Bielicke Eades, Vedder Price Law Firm, Finance Attorney
Shareholder

Deborah Bielicke Eades joined Vedder Price P.C. as a shareholder and is a member of the firm’s Investment Services Group.

Ms. Eades has extensive experience in all aspects of mutual fund and investment adviser regulation and compliance, including product design, federal and state registration, representation of fund boards, portfolio compliance, derivative instruments, affiliated transactions, electronic commerce and Web site design, privacy matters and general regulatory matters.

312-609-7661
Nathaniel Segal Investment Attorney Vedder Price Law Firm
Counsel

Nathaniel Segal is counsel at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due diligence...

(312) 609 7747
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