SEC Reevaluating Hard 4 p.m. Rule On Mutual Fund Trades
The Securities and Exchange Commission is reevaluating its proposed “hard” 4 p.m. rule on the purchase or redemption of mutual fund shares aimed at preventing late trading abuses, an official with the Securities and Exchange Commission says.
Paul F. Roye, director of SECs Division of Investment Management, says that some comment letters received by the SEC on the “hard” 4 p.m. rule say the proposal could adversely affect 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 says.
Roye testified at a Senate Banking Committee hearing.
These commentators argue, he says, 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 contests. As a result, Roye says, 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 says.