SEC's Fund Liquidity Plan Hurts Retirement Savers, Lawmakers Say

GOP lawmakers expressed “strong opposition” on Wednesday to the SEC’s proposed rule titled “Open-End Fund Liquidity Risk Management Programs and Swing Pricing; Form N-Port Reporting,” which they said would ultimately hurt retirement savers.

Sen. Bill Cassidy, R-La., ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, and Rep. Virginia Foxx, R-N.C., chairwoman of the House Education and the Workforce Committee, told SEC Chairman Gary Gensler in a letter that the “hard close” in the agency’s proposed rule “limits Americans’ ability to trade in mutual funds, threatening millions of retirement plans.”

The SEC’s proposed rule “would deny same-day pricing for mutual fund trade orders that are not received by the mutual fund, its transfer agent, or a registered clearing agency by an established cut-off time,” typically 4 p.m. Eastern, the lawmakers told Gensler.

In proposing the plan, SEC Chairman Gary Gensler stated that it better prepares “open-end funds for stressed conditions and to mitigate dilution of shareholders’ interests.”

The rule and form amendments, Gensler said, “would enhance how funds manage their liquidity risks, require mutual funds to implement liquidity management tools, and provide for more timely and detailed reporting of fund information.”

Gensler added that “a defining feature of open-end funds is the ability for shareholders to redeem their shares daily, in both normal times and times of stress.”