US SEC Provides Temporary Flexibility for Funds Regarding Coronavirus

The US SEC temporarily has granted additional flexibility to investment companies affected by the coronavirus. The SEC allows funds to use additional funding and other tools to manage their portfolios for the benefit of investors.

24 March, 2020 | AtoZ Markets – US has been severely affected by the global COVID-19 pandemic. More than 40,000 cases of coronavirus have been identified in the country, with more than 500 deaths. The COVID-19 pandemic continues to impact on global financial markets and private funds.

SEC Temporarily Allows Additional Flexibility

The US Securities and Exchange Commission (SEC) said that it would grant temporary flexibility to borrow. It would make certain other loan agreements to registered investment companies affected by the coronavirus pandemic.

Temporary relief provides registered funds with additional tools to manage their portfolios. Moreover, investors may seek to rebalance their investments, the SEC said. Chairman Jay Clayton also said:

“The temporary action will provide an additional tool that funds can use to manage their portfolios for the benefit of their investors in the current market environment. This action provides funds with additional flexibility to navigate volatile markets while meeting their obligations to investors.”

This temporary flexibility is to help financial market participants cope with the impact of coronavirus on the financial markets. SEC’s staff will continue to assess the coronavirus impact on investors and market participants and will consider further relief from other regulation when necessary and appropriate.

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The Commission granted the following temporary exemption to the investment company:

  • Registered open-end funds and separate accounts of insurance companies may borrow money from certain subsidiaries.
  • Additional flexibility within the framework of existing inter-fund loan agreements.
  • Registered open-end funds may enter into loan agreements or borrowings that deviate from the policies, subject to the prior approval of the board.

This temporary relief will be extended until the date specified in a public notice from the staff. The exemption will end, which date will be at least two weeks after the date of the notice and not before June 30, 2020. The Commission may grant additional relief if circumstances warrant.

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