SEC Replaces Rather than Revises
In late October, the SEC approved a wholesale replacement for the patchwork of interpretive and no-action positions it had developed over more than 40 years to regulate fund use of derivatives. The process of developing these derivative reforms has itself taken many years, including a subsequently withdrawn 2015 rule proposal, and a 2019 rule proposal that the SEC has now adopted with modifications.
The nature and approach of these derivative reforms very much echo other major SEC brush-clearing projects that have recently come to fruition. See, for example, the SEC’s “fund of fund” reforms, discussed in our article on page 4, and the SEC’s reform of fund liquidity regulation, discussed in “SEC Adopts Liquidity Risk Programs for Funds,” Expect Focus – Life, Annuity, and Retirement Solutions (Dec. 2016). Indeed, the latter reform, requiring that funds have liquidity risk programs, works in tandem with the derivative reforms, as these