SEC Allows Open-End Funds to Borrow from Affiliates to Meet Redemptions
The SEC has provided relief to open-end funds to allow otherwise impermissible borrowings through June 30, 2020 to respond to the coronavirus pandemic. Open-end registered funds may borrow from affiliates to meet redemption requests so long as the independent directors approve the borrowing and the fund sponsor notifies the SEC by email. Registered funds may also enter into interfund lending arrangements and deviate from fundamental policies so long as they meet approval and notification requirements.
OUR TAKE: The SEC has borrowed some of the successful plays from the 2008 financial crisis playbook. Back then, many firms sought specific exemptive relief to allow emergency borrowings. Good work by the SEC to remove some of the bureaucratic barriers so that fund sponsors can move quickly to ensure liquidity.