On December 26, 2013, the Securities and Exchange Commission's Division of Investment Management ("IM") issued No-Action Letters to the Chicago Mercantile Exchange, ICE Clear Credit and LCH Clearnet. The letters can be accessed by clicking here and looking for the letters under the "Chronological List of No Action Letters".
In effect, these no-action letters extended relief from section 17(f) of the Investment Company Act of 1940 (the "1940 Act") for certain interest rate and credit default swaps cleared at these three derivatives clearing organizations (commonly called, CCPs, clearinghouses or central counterparties). The original relief has now been extended through December 31, 2014. For a March 2011 posting from The Swap Report on the topic of the application of the custody rules to section 17, you can go here - once at that site, you can access another posting from March 2011** that will provide you with more information about the interplay of the 1940 Act custody rules and initial margin on cleared swaps.
**One caveat, in case you do decide to read the 2011 posting, it appears that IM is following the path of renewing No-Action Relief, instead of issuing a final rule - so, disregard any suggestion from the earlier pieces to the contrary.
Good night. Good extension. TSR
This article is presented for informational purposes only and is not intended to constitute legal advice.
