SEC Issues “Concept Release” on Funds’ Use of Derivatives


The Securities and Exchange Commission recently issued a “Concept Release” stating that the Commission and its staff are reviewing the use of derivatives by mutual funds, closed-end funds and business development companies (collectively, “funds”).1 The Commission requests comments on such derivative-related topics as fund leverage, diversification, exposure to certain securities-related issuers, portfolio concentration and valuation.

The Commission intends to determine whether further regulatory initiatives or guidance is needed to improve the current regulatory framework. The Concept Release itself provides little regulatory guidance, although it does provide a synopsis of previous guidance and some insights into the ways in which regulators outside the United States have attempted to address certain issues, particularly the leveraging impact of certain derivatives.

The comment period for the Concept Release ends on November 7, 2011.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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