Split SEC Will Allow Funds To Expand Derivatives Use

Law360 (October 28, 2020, 6:42 PM EDT) -- A divided U.S. Securities and Exchange Commission on Wednesday approved a rule that would regulate how mutual funds and other investment companies use risky derivatives to boost returns, seeking to replace a patchwork system with concrete standards.

The SEC's action is the latest in yearslong efforts to create new rules that reflect the growth of derivatives, which are instruments widely used by investment managers as a means of improving returns albeit at greater risk. The agency said it has relied on various staff guidance to advise market participants on the acceptable use of derivatives since a general policy statement issued in...

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