SEC Proposes Liquidity Management Rules for Open-End and Exchange-Traded Funds

On September 22, 2015, the Securities and Exchange Commission (SEC) voted to propose a new Rule 22e-4 under the Investment Company Act of 1940 (the 1940 Act), as well as amendments to its rules and forms designed to promote effective liquidity risk management for open-end funds (i.e., mutual funds and exchange-traded funds, or ETFs). Additionally, the proposed amendments would allow open-end funds (other than money market funds and ETFs) to use “swing pricing” and would enhance disclosure regarding fund liquidity and redemption practices.

The SEC’s proposals would (1) introduce a new Rule 22e-4 under the 1940 Act requiring registered open-end funds (including ETFs, but not including money market funds) to establish a liquidity risk management program, (2) amend Rule 22c-1 under the 1940 Act to permit, but not require, registered open-end funds (except for ETFs and money market funds) to use “swing pricing” and amend Rule 31a-2 to require funds to preserve certain records related to swing pricing, and (3) amend disclosure and reporting requirements on Form N-1A, proposed Form N-PORT and proposed Form N-CEN regarding swing pricing and liquidity risk management.

Please see full publication below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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