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Proposed RIC Rules Look to SEC to Define Security, Tax Analysts

October 03, 2016

Proposed regulations on regulated investment companies’ commodity investments and a related no-rule revenue procedure were issued on September 27.

The proposed regulations (REG-123600-16) address the RIC income test and asset diversification requirements. For purposes of the income test and the asset diversification requirements, an asset is a security if it is a security under the Investment Company Act of 1940. The preamble notes that the government has previously addressed whether specific instruments or positions are securities for purposes of section 851 but states that ‘‘any future guidance regarding whether particular financial
instruments, including investments that provide RICs with commodity exposure, are securities for purposes of the 1940 Act is . . . within the jurisdiction of the SEC.’’ 

Partner Richard LaFalce is quoted.

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