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March 11, 2004 at 07:00 PM
NU Online News Service, March 11, 2004, 6:15 p.m. EST, Washington – The U.S. Securities and Exchange Commission is reevaluating its proposed “hard” 4 p.m. rule on the purchase and redemption of mutual fund shares.[@@]
The SEC proposed the rule in an effort to prevent late trading abuses.
Paul F. Roye, director of the SEC’s Division of Investment Management, testified about the proposal at a Senate Banking Committee hearing.
Roye told senators that some comment letters received by the SEC on the “hard” 4 p.m. rule say the proposal could hurt some intermediaries.
“While we believe the proposed rule amendment would virtually eliminate the potential for late trading through intermediaries that sell fund shares, it is clear from the comments that some believe that the hard 4 [p.m.] rule is not the preferred approach,” he said.
The commentators argue that the proposal will require the intermediaries to have cut-offs for orders well before 4 p.m. and limit investor opportunities to place orders for fund transactions, particularly in the 401(k) plan context, Roye said.
As a result, Roye said, the SEC is considering other approaches to address the issue.
“We do not want to adversely impact fund investors if there are alternatives that effectively, truly effectively, address late trading abuses,” Roye said.
