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SEC Proposes New Rules for Mutual Funds, ETFs

Joe Mont | September 22, 2015

The Securities and Exchange Commission— as it prepares to celebrate the 75th anniversary of the Investment Company Act and the Investment Advisers Act next week—has proposed a slate of rules intended to enhance effective liquidity risk management by mutual and exchange-traded funds.

“These proposals are intended to foster a rigorous and analytically sound approach to liquidity risk management, while also helping investors to better guage the ability of funds to fulfill redemption obligations,” Commissioner Luis Aguilar said.

A key feature of open-end funds is that they allow investors to redeem their shares daily. Funds must maintain sufficiently liquid assets in order to meet shareholder redemptions while also minimizing the impact of those redemptions on the fund’s remaining shareholders. Proposed rule 22e-4 would require them to have a liquidity risk management program. Elements of that program would...

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