Investment Management Partner Quoted in Ignites on Illiquid Holdings Under the SEC’s Final Liquidity Rule
A Nov. 23 article published by Ignites
outlines that in the final liquidity rule released by the SEC on Oct. 13, funds are required to have written liquidity risk management programs and the SEC adopted a new standard and revised factors that open-end funds must consider in determining whether an investment is regarded as illiquid. In relation to the assessment of liquidity risk associated with the required programs, the SEC indicated that funds with substantial holdings in certain bank loans and foreign securities with longer settlement periods may face challenges in operating as open-end funds. “Such statements may indicate that the regulator does not think that funds “primarily” holding securities with settlement periods greater than seven days are appropriate for an open-end fund, stated investment management partner David Sullivan
(Boston) in the article. “The SEC’s message seems to be that, among other possible types of funds, a hard look should be given to certain bank loan, foreign and other funds that hold primarily securities that settle beyond seven days as to whether they should remain as open-end funds, and fund boards appear to be at least indirectly responsible for making what will involve very difficult assessments,” Mr. Sullivan details in the piece.