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SEC Working on Recommendations Related to Fund Use of Derivatives, Uniform Fiduciary Standard

In a speech commemorating the 75th anniversary of the Investment Company and Investment Advisers Acts, SEC Chair Mary Jo White highlighted “a full plate of critical initiatives” currently underway at the Commission. She noted that staff is developing recommendations related to “the use of derivatives by funds, including measures to appropriately limit the leverage these instruments may create, as well as enhancing risk management programs for such activities.” White said that she hopes that the staff can finish the recommendations and that the Commission can propose the rules by the end of the year. Commissioner Michael Piwowar had previously mentioned this work in his remarks at the open meeting regarding the SEC’s recent liquidity proposal.

White also noted that the SEC also is working on “recommendations regarding transition planning for advisers, annual stress testing by large investment advisers and funds, a program of third party examinations for investment advisers and a uniform fiduciary duty for investment advisers and broker-dealers.” In a recent letter to Senator Tim Scott, White discussed the SEC’s work on a uniform fiduciary duty. She suggested that “this is a complex issue, and []there are many challenges that will need to be addressed in proposing a uniform fiduciary standard, including how to define the standard, how it would affect current business practices, and the nature of the potential effects on investors, particularly retail investors.” She described as “important” the consultation between staff at the Department of Labor staff and the SEC, but suggested that the “consultations were not intended to reach agreement between the agencies on DOL's Proposed Rule.”