Mutual Funds Get Guidance and Relief for Commodity Investments

Given their strict regulatory regime, the use of commodities has long been a sticky subject for mutual funds. At the same time, however, the competitive environment for returns amongst mutual funds has made use of derivatives and commodity interests by registered investment companies much more common, with even funds that previously eschewed these instruments finding them useful and necessary. Over the past five or so years, and particularly so since the financial crisis, regulators have become more and more concerned about the accompanying risk and leverage that derivatives and commodities bring to mutual funds, as well as the ways funds are disclosing - or not disclosing - to shareholders the risks they are taking by using them.  Last week, the Division of Investment Management issued long awaited guidance on the use of commodities by registered investment companies. Entitled, "Disclosure and Compliance Matters for Investment Company Registrants that Invest in Commodity Interests," the guidance is intended to assist those funds in preparing disclosure filings and in their consideration of compliance issues. Virtually simultaneously, the CFTC has approved rules applicable to mutual funds investing in commodities to help ease the burden of dual regulation by the SEC and CFTC of those activities.

Tuesday, August 20, 2013/Author: David Schwartz J.D. CPA/Number of views (12036)/Comments (0)/
RSS
First3456789101112Last