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December 04, 2003 at 07:00 PM
NU Online News Service, Dec. 4, 2003, 5:19 p.m. EST – The U.S. Securities and Exchange Commission took steps Wednesday to fight late trading, market timing and related abuses in the mutual fund industry.[@@]
Members of the commission voted Wednesday to propose a rule requiring that fund orders be received by 4 p.m.
The proposal would require that, to receive the current day’s price, an order to buy or sell mutual fund shares be received by the mutual fund, or its primary transfer agent or a registered securities clearing agency, by the time that the fund establishes for calculating its net asset value in order. The time is 4 p.m. for most funds, the SEC says.
The SEC says the timing rule would eliminate the potential for late trading through intermediaries that sell fund shares.
Commission members also voted to propose new disclosure rules.
The new rules would require funds to disclose market timing policies and procedures, practices regarding “fair valuation” of portfolio securities, and policies and procedures dealing with the disclosure of portfolio holdings. The new disclosures would shed light on market timing and selective disclosure of portfolio holdings, the SEC says.
Members of the public will have 45 days to comment on the proposed timing rule and the proposed disclosure requirements rule.
Commission members voted at the same meeting to adopt a compliance rule that will require funds and advisors to have compliance policies and procedures, review compliance policies annually, and designate a chief compliance officer. The fund compliance chief must report directly to the fund board, the SEC says.
