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This post completes our exploration of the definition of “derivatives transactions” in Rule 18f-4, which is relevant to business development companies, closed-end funds and open-end funds other than a money market fund (“Funds”). Our object is to generate a fairly comprehensive list of what is, is not, and may be a “derivatives transaction” by using our touchstone of a “future payment obligation” in combination with the literal definition in the rule and points made in earlier posts.

This is the sixth installment of our discussion of the compliance requirements of new Rule 18f‑4 and wraps up our discussion of paragraph (d) of the new rule and its application to business development companies (“BDCs”), closed-end funds and open-end funds other than money market funds (collectively, “Funds”). This posts identifies which Funds need to update their asset coverage procedures for compliance with Section 18 of the Investment Company Act of 1940 and what those updates should entail.

This is the fifth installment of our discussion of the compliance requirements of new Rule 18f‑4 and completes our consideration of paragraph (d) of the new rule and its application to business development companies, closed-end funds and open-end funds other than money market funds (“Funds”). Our two previous posts considered the application of that paragraph to reverse repurchase agreements (“reverse repos”) and “similar financing transactions.” This posts identifies transactions that the adopting release (the “Release”) indicates would not be similar to reverse repos. These transactions fall into two categories: (a) derivatives instruments that will be subject to the conditions of paragraph (c) of Rule 18f‑4 and (b) transactions not at all subject to Rule 18f‑4.