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SEC Proposes Measures to Curb Fund Trading Abuses

By Staff Writer

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Dec. 4, 2003 — The SEC has proposed a rule requiring that fund orders be received by 4:00 p.m. as part of a series measures to address late trading, market timing and related abuses in the mutual fund industry. The Commission is seeking to eliminate the potential for late trading through intermediaries that sell fund shares.

At a meeting in Washington yesterday, the SEC also voted to adopt a compliance rule that will require funds and advisers to (a) have compliance policies and procedures, (b) annually review them, and (c) designate a chief compliance officer who, for funds, must report to the board of directors.

Finally, the Commission voted to propose enhanced disclosure requirements. These enhancements would require funds to disclose (a) market timing policies and procedures, (b) practices regarding “fair valuation” of their portfolio securities, and (c) policies and procedures with respect to the disclosure of their portfolio holdings.