SEC Adopts New Rule Governing Registered Funds’ Use of Derivatives
Client Memorandum

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Our client memorandum discusses the key takeaways and main provisions of new Rule 18f‑4 under the Investment Company Act, which was adopted by the SEC in a release dated November 2, 2020.  According to the adopting release, Rule 18f‑4 applies to the use of derivatives transactions and certain other transactions by registered investment companies (other than money market funds and UITs) and business development companies, and is designed to promote the ability of registered funds to use derivatives in a broad variety of ways that serve investors, while still addressing the investor protection concerns underlying Section 18 of the Investment Company Act.