Company: SVIX
Filing Date: 2025-09-16
Form Type: 424B3
Source: 0001213900-25-087932
Chunk: 27

Company: VS Trust
Filing Date: 2025-09-16
Form: 424B3
Chunk 27
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 as a means to achieve its investment objective. The use of derivatives by the Funds exposes them to counterparty risks. 13 Regulatory Treatment Derivatives are generally traded in over -the -counter(“OTC”) markets and have only recently become subject to comprehensive regulation in the United States. Cash -settledforwards are generally regulated as “swaps”, whereas physically settled forwards are generally not subject to regulation or subject to the federal securities laws (in the case of securities). Title VII of the Dodd -FrankAct (as defined below) (“Title VII”) created a regulatory regime for derivatives, with the Commodity Futures Trading Commission (the “CFTC”) responsible for the regulation of swaps and the SEC responsible for the regulation of “security -basedswaps.” The SEC requirements have largely yet to be made effective, but the CFTC requirements are largely in place. The CFTC requirements have included rules for some of the types of transactions in which the Funds will engage, including mandatory clearing and exchange trading for certain categories of swaps, reporting, and margin for uncleared swaps. Title VII also created new categories of regulated market participants, such as “swap dealers,” “security -basedswap dealers,” “major swap participants,” and “major security -basedswap participants” who are, or will be, subject to significant new capital, registration, recordkeeping, reporting, disclosure, business conduct and other regulatory requirements. The regulatory requirements under Title VII continue to be developed and there may be further modifications that could impact materially and adversely the Funds, the markets in which the Funds trade and the counterparties with which the Funds engage in transactions. As noted, the CFTC rules do not apply to all of the physically settled forward contracts entered into by the Funds. Investors, therefore, may not receive the protection of CFTC regulation or the statutory scheme of the Commodities Exchange Act of 1934 (“CEA”) in connection with the Funds’ physically settled forward contracts. The lack of regulation in these markets could expose investors to significant losses under certain circumstances, including in the event of trading abuses or financial failure by participants. Counterparty Credit Risk Each Fund will be subject to the credit risk of the counterparties to derivatives. In the case of cleared derivatives, each Fund will have credit risk to the clearing corporation in a similar manner as each Fund would for futures contracts. In the case of uncleared derivatives, each Fund will be subject to the credit risk of the counterparty to the transaction — typically a single bank or financial institution.