SEC temporarily allows additional flexibility to investment companies affected by Covid-19

The Securities and Exchange Commission announced yesterday a temporary flexibility for registered funds affected by the recent volatile market situation to borrow funds from certain affiliates and to enter into certain other lending arrangements. The relief is interceded to provide funds with additional tools to manage their portfolios so that all shareholders as investors may seek to re-balance their investments.

Chairman Jay Clayton commented:

Jay Clayton

Jay Clayton, SEC

Today’s temporary action will provide an additional tool that funds can use to manage their portfolios for the benefit of their investors in the current market environment. This action provides funds with additional flexibility to navigate volatile markets while meeting their obligations to investors.

The temporary flexibility is a latest step in a serious of actions the Commission has taken to help the financial market participants in addressing the impact of the coronavirus on the financial markets. The agency’s website provides additional information regarding its response to the outbreak. SEC’s staff will continue to assess the impacts of the coronavirus on investors and market participants and will consider additional relief from other regulation where it is necessary and appropriate. Companies and financial professionals who are affected by the Covid-19 outbreak are encouraged to contact the staff with their questions and concerns.

The Commission has granted the following temporary exemptive relief from the Investment Company:

  • Registered open-end funds and insurance companies separate accounts can borrow money from certain affiliates.
  • Additional flexibility under existing interfund lending arrangements and extending the ability to use interfund lending arrangements to funds that do not currently have exemptive relief.
  • Registered open-end funds can enter into lending arrangements or borrowings that stray from policies, subject to prior board approval.

The temporary regulatory relief will last until 30 June 2020 unless extension is warranted.

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