# kaal:claim:2811729-015

**Claim.** Proposed Rule 18f-4 would be highly limited in mitigating liquidity and other risks in an unconstrained mutual fund portfolio, because material leverage, counterparty, and liquidity risks in such a fund can arise from investments in a range of non-derivative instruments that the rule does not reach.

**Type.** failure  **Support.** argued

**Holds when.**

- proposed Company Act Rule 18f-4 as proposed in December 2015
- unconstrained mutual funds with broad investment authority

**Source quote.**

> in mitigating significant liquidity or other risks in a UMF portfolio is therefore potentially (highly) limited, as material leverage, counter-party, liquidity, and other risks to a particular UMF could arise from the fund's investments in a range of non-derivative instruments,

**From.** Wulf A. Kaal, *Unconstrained Mutual Funds and Retail Investor Protection* (2016), III.A. Mutual Fund Regulation, footnote 115, page 25

**Cite as.** Wulf A. Kaal, Unconstrained Mutual Funds and Retail Investor Protection (2016). SSRN: https://ssrn.com/abstract=2811729

**Verify.** sha256 of source PDF `0877b0a076f2614559cb0b1a736f73401cecbee7cfe014da6e36709208e92a74` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Anderson%20-%202016%20-%20Unconstrained%20Mutual%20Funds%20and%20Retail%20Investor%20Protection.pdf

**Failure mode.** Instrument-specific rule misses strategy-level risk  (family: enforcement-gap)

**Topics.** defi, risk-and-incentives, dynamic-regulation, securities-law

**Keywords.** rule-18f-4, derivatives-regulation, liquidity-risk, regulatory-design, sec-rulemaking

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