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U.S. SEC Looking Into Bank-Loan, Exchange-Traded Funds After Third Ave

February 20, 2016

Charles SolomonCharles Solomon

The U.S. Securities and Exchange Commission is wrapping up reviews of bank-loan and exchange-traded funds that share some characteristics with the Third Avenue junk bond fund that buckled under a wave of redemptions in December, an official said on Saturday.

When the Third Avenue fund abruptly shut down, the major securities regulator raced to examine the liquidity of 70 funds with the same high-yield investment strategy across the country, checking if any were “in danger of going down the path of Third Avenue,” said Jane Jarcho, associate director in the office of compliance inspections and examinations.

It then began examining funds that shared other features with Third Avenue.

“We are currently looking at some that have related characteristics. So we are looking at bank-loan funds that may have similar problems. We’re also looking at ETFs,” she said at a meeting of securities lawyers, referring to exchange-traded funds.

Most of the reviews “are at their end stage,” she said. While the results will be shared with the commission, they may not be publicly released.