SEC Requests Comments on Supplemental Economic Analysis on Derivatives Rule

The SEC recently released new economic analysis related to its rule proposal on the use of derivatives by registered funds and business development companies.The economic analysis comes in response to certain comments from the industry regarding proposed methods to measure a fund’s derivatives exposure. The SEC release stated that commenters on the proposed rule“suggested that the rule should measure a fund’s derivatives exposure using notional amounts adjusted to reflect the risks of the underlying reference assets. These commenters suggested that the Commission adopt risk-based adjustments derived from standardized schedules used for other regulatory purposes. Many commenters also suggested that a fund be permitted to maintain as qualifying coverage assets a range of assets in addition to cash and cash equivalents, subject to “haircuts” to the value of these additional assets identified in standardized schedules included in other regulatory requirements.”  The SEC stated that it is making the economic analysis available to allow the public to consider and comment on this supplemental information.