The SEC’s recent release proposing the adoption of new Rule 18f-4 under the Investment Company Act of 1940 is the culmination of years of focus on the concept of hidden leverage. Indeed, the SEC’s Concept Releases date back to 2011. The SEC is particularly concerned about funds where the risks of leverage may not be apparent and is of the opinion that derivatives-related exposures should be viewed as leverage. The SEC’s initial proposal might not be ideally suited to meeting the agency’s stated aims and could have a number of unintended consequences.

Click here to read this article, in which SRZ partner John J. Mahon talks to The Hedge Fund Journal about eight implications of the SEC’s recent proposal.