SEC eases capital limit for funds
‘Funds without actual investment in financial derivatives shall not be subject to the SBG limit. This includes equity funds, balanced funds and multi-asset funds that have actual exposure to equity securities’
Daily Tribune‘Funds without actual investment in financial derivatives shall not be subject to the SBG limit. This includes equity funds, balanced funds and multi-asset funds that have actual exposure to equity securities’
The Securities and Exchange Commission (SEC) has eased investment restrictions for certain funds, giving fund managers more flexibility in portfolio allocation.
The move is expected to benefit equity, balanced and multi-asset funds with actual exposure to equity securities.
The exemption, outlined in SEC Memorandum Circular (MC) 2, Series of 2025, lifts the single business group (SBG) investment limit imposed by MC No. 15, 2020.
The SBG limit previously restricted investment companies from allocating more than 20 percent of their net assets to securities, money market instruments, deposits, and over-the-counter financial derivatives issued by a single business group.
Instead of the SBG limit, exempted funds will now be governed by the single entity or issuer investment limit under Rule 6.8(b) of the Investment Company Act’s (ICA) implementing rules and regulations until further notice.
Limit not required
“Funds with no actual investment in financial derivatives shall not be subject to the SBG limit. This includes equity funds, balanced funds, and multi-asset funds that have actual exposure to equity securities,” the SEC clarified.
The SEC also noted that no fines or penalties will be imposed on covered funds for SBG limit breaches from 15 May 2020 to 27 March. However, violations of the single entity/issuer limit under Rule 6.8(b) will be subject to penalties under existing laws.
Fund managers seeking to offer their products in ASEAN markets as Qualifying Collective Investment Schemes must still comply with the 20 percent SBG limit set by regional standards.