The staff of the SEC's Division of Investment Management released this week a series of frequently asked questions (FAQs) regarding new Rule 22e-4 (the "Liquidity Rule"). The Liquidity Rule requires non-money market mutual funds and certain exchange-traded funds (ETFs) to adopt and implement a liquidity risk management (LRM) program designed to reduce the risk that funds will be unable to meet their redemption obligations and to mitigate dilution of the interests of fund shareholders.
The FAQs relate to sub-advised funds and ETFs that meet redemptions through in-kind transfers of securities, positions, and assets other than a de minimis amount of cash ("In-Kind ETFs"), and are a timely reminder that the compliance date for the Liquidity Rule is fast approaching. Funds that, together with other investment companies in the same group of related investment companies, have net assets of $1 billion or more as of the end of their most recent fiscal year must implement an LRM program by December 1, 2018. Smaller entities have until June 1, 2019 to comply with the Liquidity Rule.
For more information, read our client alert.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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