The Securities and Exchange Commission will not be moving forward at this time with a proposal involving so-called “swing pricing”, according to a report by Financial Advisor and Bloomberg News.
Swing pricing is a method in which the costs of redeeming shares in a mutual fund are passed on to the redeemer, which can limit the effect of a panic sale in stressful times. It swings the share price above or below a fund’s net asset value per share, in the event that flows in or out of a fund are deemed to be too large.
The SEC’s original proposal, put forth in November 2022, would have imposed mandatory swing pricing on mutual funds during times of high redemptions. Opponents said this would end up being too costly for investors.
The commission has now backed off from the plan, which was not mentioned on the agenda for its most recent meeting. The SEC instead approved more-frequent disclosures of mutual-fund performance that had accompanied the swing-pricing measure, while also issuing new guidance on existing liquidity-risk-management rules.
In a move to provide investors with greater transparency, mutual funds and exchange-traded funds will now be required to report portfolio holdings on a monthly basis rather than four times a year. SEC Chair Gary Gensler said more frequent reporting would help investors monitor their holdings and identify overlapping investments while giving the SEC greater visibility to identify trends and respond during market stress.
“Lest we need any reminders, the past few years have brought disruptions in markets, reacting to the start of COVID-19, wars abroad, and major bank failures,” Gensler said.
Under current rules, registered investment management companies are required to file quarterly reports on portfolio holdings with the commission 60 days after the close of each quarter. But investors only gain access to data that cover the third month of the quarter.
There was strong opposition to the original swing pricing proposal from the industry as well as Democratic lawmakers. With over 60% of 401(k) plan assets held in mutual funds, opponents contended that swing pricing would increase financial burdens on retirement investors during times of market turbulence.
The SEC indicated in July that its staff will recommend revisions in the original swing pricing proposal.
The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. When it comes to regulatory compliance and enforcement matters, our attorneys have dealt with investigations and enforcement actions stemming from allegations including violations of SEC, FINRA, and SRO rules and regulations. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.
