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SEC issues final rule on investment company liquidity risk management

Rachael Leah Schwartz (Schiff Hardin LLP, New York, New York, USA)
Domenick Pugliese (Schiff Hardin LLP, New York, New York, USA)
Marguerite Bateman (Schiff Hardin, Washington, DC, USA)
Kimberly Vargo (Schiff Hardin, Washington, DC, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 2 May 2017

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Abstract

Purpose

To provide an overview of the US Securities and Exchange Commission’s (SEC) recently adopted rule 22e-4 (Rule 22e-4) under the Investment Company Act of 1940, as amended (1940 Act) regarding investment company liquidity risk management programs.

Design/methodology/approach

Reviews and summarizes the specific requirements of Rule 22e-4 to better enable investment companies and their boards to comply by the general compliance date of December 1, 2018 (smaller complexes have until June 1, 2019).

Findings

The SEC clarifies that each fund should tailor its particular Program to ensure that it is adequately assessing and managing its specific liquidity risk based on its investment strategies and risks; however, it is not expected that a fund would eliminate all adverse impacts of liquidity risk. In addition, under the final rule, while the board does have certain duties and responsibilities with respect to certain aspects of a fund’s Program, the SEC pared back much of what had been in the Proposing Release to ensure that the board’s role remains one of oversight and not management.

Practical implications

Although the compliance date does not occur for almost two years, funds and their boards should begin reviewing the Rule 22e-4 requirements now and developing their Program.

Originality/value

Practical guidance from experienced investment management attorneys that provides insight into expectations for compliance with Rule 22e-4.

Keywords

Citation

Schwartz, R.L., Pugliese, D., Bateman, M. and Vargo, K. (2017), "SEC issues final rule on investment company liquidity risk management", Journal of Investment Compliance, Vol. 18 No. 1, pp. 43-52. https://doi.org/10.1108/JOIC-02-2017-0006

Publisher

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Emerald Publishing Limited

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