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Law Firms Release Memos on Liquidity, Swing Pricing and Reporting Modernization Rules

The SEC’s recent rulemaking activity is spurring discussion as the industry digests the 1940 Act regulations adopted in the last month. Law firms are beginning to publish in-depth summaries of the liquidity rule, some describing the rule’s key provisions in great detail and others providing helpful comparisons of the final and proposed rule. The majority of the memos note the SEC’s responsiveness to commenters’ concerns about the liquidity classification buckets, which were reduced to four from the six proposed, and the duties of fund directors not being expanded beyond their traditional oversight responsibilities. Other firm memos provide practice tips and deeper analysis of what the rule requires for fund directors. Certain memos draw out aspects of the liquidity rule that could bring major shifts to the industry, for instance more frequent use of the closed-end fund structure and significant modification to some funds’ investment strategies. Some firms address the liquidity and swing pricing rules separately while others discuss both rules in one memo, including board duties under a swing pricing regime. For the reporting modernization rules, one memo’s comprehensive review observes that the rules greatly expand the volume of information regarding fund portfolio holdings and investment practices that must be disclosed to the SEC.