[Federal Register Volume 89, Number 16 (Wednesday, January 24, 2024)]
[Notices]
[Pages 4641-4642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-01282]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-821, OMB Control No. 3235-0776]


Proposed Collection; Comment Request; Extension: Rule 18f-4

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549-2736

    Notice is hereby given that, pursuant to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange 
Commission (the ``Commission'') is soliciting comments on the 
collection of information summarized below. The Commission plans to 
submit the existing collection of information to the Office of

[[Page 4642]]

Management and Budget (``OMB'') for extension and approval.
    Rule 18f-4 (17 CFR 270.18f-4) under the Investment Company Act of 
1940 (15 U.S.C. 80a-1 et seq.) (the ``Investment Company Act'') permits 
a fund to enter into derivatives transactions, notwithstanding the 
prohibitions and restrictions on the issuance of senior securities 
under section 18 of the Investment Company Act. A fund that relies on 
rule 18f-4 to enter into derivatives transactions generally is required 
to: adopt a derivatives risk management program; have its board of 
directors approve the fund's designation of a derivatives risk manager 
and receive direct reports from the derivatives risk manager about the 
derivatives risk management program; and comply with a VaR-based test 
designed to limit a fund's leverage risk consistent with the investor 
protection purposes underlying section 18 of the Investment Company 
Act. Rule 18f-4 includes an exception from the derivatives risk 
management program requirement and limit on fund leverage risk if a 
fund limits its derivatives exposure to 10% of its net assets (the fund 
may exclude from this calculation derivatives transactions that it uses 
to hedge certain currency and interest rate risks). A fund relying on 
this exception will be required to adopt policies and procedures that 
are reasonably designed to manage its derivatives risks.
    Rule 18f-4 also includes an exception from the VaR-based limit on 
leverage risk for a leveraged/inverse fund that cannot comply with rule 
18f-4's limit on fund leverage risk and that, as of October 28, 2020, 
is: (1) in operation, (2) has outstanding shares issued in one or more 
public offerings to investors, and (3) discloses in its prospectus that 
it has a leverage multiple or inverse multiple that exceeds 200% of the 
performance or the inverse of the performance of the underlying index 
(for purposes of this Supporting Statement, such a fund is an ``over-
200% leveraged/inverse fund''). A fund relying on this exception must 
disclose in its prospectus that it is not subject to rule 18f-4's limit 
on fund leverage risk.
    Finally, rule 18f-4 permits funds to enter into reverse repurchase 
agreements (and similar financing transactions) and ``unfunded 
commitments'' to make certain loans or investments, and to invest in 
securities on a when-issued or forward-settling basis, or with a non-
standard settlement cycle, subject to conditions tailored to these 
transactions.
    The respondents to rule 18f-4 are registered open- and closed-end 
management investment companies and BDCs. Compliance with rule 18f-4 is 
mandatory for all funds that seek to engage, in reliance on the rule, 
in derivatives transactions and certain other transactions that the 
rule addresses, which would otherwise be subject to the restrictions of 
section 18 of the Investment Company Act.
    The information collection requirements of rule 18f-4 are designed 
to ensure that funds maintain the required written derivatives risk 
management programs that promote compliance with the federal securities 
laws and protect investors, and otherwise comply with the requirements 
of the rule. The information collections also assist the Commission's 
examination staff in assessing the adequacy of funds' derivatives risk 
management programs and their compliance with the other requirements of 
the rule, and identifying weaknesses in a fund's derivatives risk 
management if violations occur or are uncorrected.
    The respondents to rule 18f-4 are registered open- and closed-end 
management investment companies and BDCs. Compliance with rule 18f-4 is 
mandatory for all funds that seek to engage, in reliance on the rule, 
in derivatives transactions and certain other transactions that the 
rule addresses, which would otherwise be subject to the restrictions of 
section 18 of the Investment Company Act. To the extent that records 
required to be created and maintained by funds under the rule are 
provided to the Commission in connection with examinations or 
investigations, such information will be kept confidential subject to 
the provisions of applicable law.
    Written comments are invited on: (a) whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
estimate of the burden of the collection of information; (c) ways to 
enhance the quality, utility, and clarity of the information collected; 
and (d) ways to minimize the burden of the collection of information on 
respondents, including through the use of automated collection 
techniques or other forms of information technology. Consideration will 
be given to comments and suggestions submitted by March 25, 2024.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information under the PRA unless it 
displays a currently valid OMB control number.
    Please direct your written comments to: David Bottom, Chief 
Information Officer, Securities and Exchange Commission, c/o John 
Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to: 
<a href="/cdn-cgi/l/email-protection#d38381928c9eb2babfb1bcab93a0b6b0fdb4bca5"><span class="__cf_email__" data-cfemail="6f3f3d2e30220e06030d00172f1c0a0c41080019">[email protected]</span></a>.

    Dated: January 18, 2024.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-01282 Filed 1-23-24; 8:45 am]
BILLING CODE 8011-01-P


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