SEC Proposal on Investment Company Use of Derivatives – A Solution in Search of a Problem?

SEC Proposal on Investment Company Use of Derivatives – A Solution in Search of a Problem?

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WilmerHale’s Investment Management Group provides sophisticated legal and regulatory advice to investment advisers, private fund sponsors, registered funds, and their independent trustees.

Recognized as “notable derivatives practice with capabilities across a broad range of asset classes” (Chambers USA), WilmerHale’s Futures & Derivatives practice works closely with legal, compliance, and business executives at global financial institutions on a wide range of issues.

Our Futures and Derivatives Practice focuses on the legal, compliance and regulatory needs of financial market participants and their dealings with the CFTC, the National Futures Association (NFA), the US Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and other agencies and self-regulatory organizations (SROs). Attorneys on our team have served in senior positions in government agencies and SROs and worked in various capacities at global financial institutions and trade associations. Our collective experience enables us to maintain trusted relationships with these entities and others throughout the futures and derivatives industry and enhances our ability to provide clients with clear, effective and efficient counsel.

Our experience includes:

  • Advising domestic and foreign exchanges (designated contract markets, swap execution facilities and foreign boards of trading) and clearinghouses (derivatives clearing organizations) on registration, operational compliance and cross-border access issues.
  • Working with trading platform developers and operators on product development, rulebook drafting and regulatory compliance issues.
  • Advising chief compliance officers and chief regulatory officers, as well as regulatory oversight committees.
  • Working with swap dealers in connection with recordkeeping obligations, swap data reporting and business conduct standards compliance. 
  • Advising futures commission merchants and introducing brokers on registration, disclosure and other compliance matters.
  • Advising commodity pool operators, commodity trading advisors and hedge funds on registration, exemptions, disclosure and reporting.
  • Advising end users on regulatory reporting, speculative position limits and trading issues.
  • Advising on information barriers/conflicts of interest, sales practices, trading issues, and margin and net capital requirements.
  • Representing banks, hedge funds, mutual funds, pension plans and corporations in the structuring, negotiation and documentation of a broad range of equity, fixed income, currency, commodity and credit derivatives—including the negotiation of International Swaps and Derivatives Association master agreements, trade confirmations, give-up arrangements and clearing agreements
  • Representing both buy-side and sell-side market participants in the negotiation and documentation of credit support annexes compliant with global variation margin and initial margin regulations, as well as custody and account control arrangements.
  • Representing banks and corporate clients in equity derivatives transactions, including accelerated share repurchases, equity forward contracts and call spreads in connection with convertible debt issuances.
  • Advising financial market participants and numerous financial services trade associations on issues related to Congressional, CFTC, SEC, NFA, and FINRA proposed regulations and policy matters.

For more information, please contact Matthew Kulkin.

Our team provides guidance on all facets of swaps, futures and derivatives market activity, including regulatory compliance, transactions, litigation, and investigations and enforcement.

In this article published by The Review of Securities & Commodities Regulation, Amy Doberman discusses the proposed Investment Company Act Rule 18f-4 and addresses that the new requirements will further restrict the ability of registered funds to invest in derivatives and increase the oversight burden on fund boards.

After 30 years of piecemeal guidance, the Commission has issued proposed Investment Company Act Rule 18f-4, which represents a comprehensive approach to the regulation of derivatives as “senior securities.” Read the full article.

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