Hedge Funds Trading Treasuries as Dealers

Are you now a securities dealer? The Securities and Exchange Commission (SEC) blurred the distinction between who is an investor or mere trader and who is a “dealer” for purposes of the Federal Securities Laws when it adopted final rules on February 6, 2024, defining activities that require someone to register as a “dealer” or a “government securities dealer.” By a 3-to-2 vote, the SEC approved rules that would require anyone that engages in a “regular pattern of buying and selling securities” that has the effect of providing liquidity to other market participants to register as a dealer under the Securities and Exchange Act of 1934. These new rules likely will require certain private funds, and other institutional investors, to register as dealers and comply with all the regulation that follows.

In this episode of the Mutual Fund Minute, Sidley partners Jay Baris and Charles Sommers discuss what these new rules will mean and why they are significant.