RegAlert2017-12-19
Added · Updated
SEC Division of Investment Management staff letter: LCH Limited and LCH.Clearnet LLC
The Division of Investment Management permanently extends no-action assurances under Section 17(f) of the Investment Company Act of 1940, allowing registered investment companies to place and maintain cash and securities with LCH Limited or LCH.Clearnet LLC for interest rate swap margin requirements without enforcement action. This position applies to Funds or their custodians holding assets with LCH or an LCH Clearing Member, provided the arrangement satisfies Rule 17f-6 requirements including legal segregation, written contracts, and withdrawal rights. The assurance relies on representations that LCH Clearing Members comply with CFTC segregation rules and provide necessary records, while noting that risks remain and different facts could alter the conclusion.
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Investment Company Act of 1940- Section 17(f); Rule 17f-6 LCH Limited and LCH.Clearnet LLC
December 19, 2017
RESPONSE OF THE OFFICE OF CHIEF COUNSEL DIVISION OF INVESTMENT MANAGEMENT
File No.: 132-3
In a letter to you dated December 29, 2015, the staff of the Division of Investment Management indicated that we would not recommend enforcement action to the Commission under Section 17(f) of the Investment Company Act of 1940 (“1940 Act”) against any registered investment company (a “Fund”) if the Fund or its custodian places and maintains cash and/or certain securities (“assets”) in the custody of LCH Limited [1] (“LCH Limited”) or LCH.Clearnet LLC (LCH Limited and LCH.Clearnet LLC being referred to herein collectively and individually as “LCH”), each of which is a derivatives clearing organization registered with the Commodity Futures Trading Commission (“CFTC ”) [2] or a clearing member (an “LCH Clearing Member”) that is a futures commission merchant registered with the CFTC (“FCM”), for purposes of meeting LCH’s or the LCH Clearing Member’s margin requirements for certain interest rate swaps (“IRS”) that are cleared by LCH (“Letter”). [3]
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