Mandatory derivatives clearing requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act became effective in respect of a first wave of swaps on March 11, 2013. Transactions subject to this timing included those between registered swap dealers on one side and Active Funds on the other side. The covered products included several categories of interest rate swaps and credit default swaps.

As of June 10, 2013, commodity pools, hedge funds (other than Active Funds) and persons predominantly engaged in activities that are in the business of banking or activities that are financial in nature will also be required to clear these types of swaps with registered swap dealers.

All other entities including swap end users, ERISA pension plans and accounts managed by third party investment managers will be required to clear these types of swaps with registered swap dealers as of September 9, 2013. Mandatory clearing for other types of swaps will commence later.

If a fund which is subject to the clearing requirement wants to execute swaps after the applicable deadline, it should enter into a futures agreement and derivatives clearing addendum with a registered swap dealer which acts as a clearing member of the applicable clearing house. You may want to contact your sales representative at your primary swap dealer counterparty to discuss any necessary documents. Should you have any questions, please contact Craig Hickernell at 212-574-1399 or Lauri Goodwyn at 212-574-1249.