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IM Division Releases FAQs on Liquidity Rule

The SEC’s Division of Investment Management released a group of questions and answers on Liquidity Risk Management Program (LRMP) requirements that were adopted in October 2016. The document mainly addresses questions concerning sub-advised funds and ETFs, including: which program should control for a particular fund if an adviser or subadviser has responsibilities under multiple LRMPs; whether different funds may classify the same investment differently; and how a fund’s policies and procedures should address differing conclusions between an adviser and subadviser regarding an investment’s appropriate liquidity classification. The document also offers clarifications on the in-kind ETF exception.