Republican Leaders Oppose SEC Proposal on Mutual Fund Redemptions

Senate Committee on Health, Education, Labor and Pensions Ranking Member Bill Cassidy (R-LA) and House Committee on Education and the Workforce Chair Virginia Foxx (R-NC) opposed an SEC proposed rule on open-end mutual fund liquidity risk management programs and swing pricing, warning of potentially devastating consequences for U.S. retirement savers.

In a letter to the SEC, the Senators argue that the proposal 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 (a 'hard close'), typically 4 p.m. Eastern Time." The Senators stated that "investors who trade directly with a fund’s transfer agent will have a significant advantage over retirement plan participants, whose trades are typically placed through recordkeepers."

The legislators argued that the proposal puts institutional investors who trade directly with a fund’s transfer agent at a significant advantage over individual retirement plan participants. The legislators disagreed with SEC assertions that "[m]ost fund shareholders are long-term investors, and thus . . . most fund orders are not time sensitive." The legislators argued that retirement plan participants should have their transactions priced on the same day if they are timely provided to an intermediary.