Section 18 (Senior Securities and Asset Segregation)

Section 18 of the 1940 Act prohibits registered funds from issuing any “senior security”. This prohibition has been extended to limit portfolio activities that create “leverage”. This includes the use of derivatives and other common trading practices.

We invite you to join ACA for a discussion on portfolio limitations applicable to an investment company’s use of derivatives and current market practice for asset segregation requirements. Our speakers will also briefly discuss the SEC’s proposed derivatives rule.

Discussion Topics:

• History of Section 18 – Prohibition on issuance of a "senior security"
• Release 10666 and SEC No-Action Letters that have shaped how investment companies comply with Section 18
• Overview of proposed rule 18f-4