SEC Adopts New Rules
To Counter Market Timing
Final adoption by the Securities and Exchange Commission on April 13 of regulatory requirements to counter market timing generally was greeted positively. There were, however, lingering concerns over points in the new rules, such as specific detailing of policies to counteract abuses.
In a 5-0 vote, the Commission adopted amendments to investment company registration forms that address disclosure regarding market timing, fair value pricing and selective disclosure of portfolio holdings. The requirements will become effective for registration statements filed on or after Dec. 5, 2004.
The American Council of Life Insurers and the Investment Company Institute, a mutual fund trade group, both in Washington, offered general support for the action.
A disclosure approach explaining the risk of a high transaction turnover is a constructive change, says Carl Wilkerson, ACLI vice president and chief counsel-securities litigation. Wilkerson says ACLI still needs to see the final regulations in order to comment fully on their details.
However, based on the proposals, he says, there are several concerns the ACLI has on the changes. A specific description of policies and procedures that are in place is “a snapshot” that does not reflect how they might change as companies adapt to new marketing timing action. “It retards the ability [to act],” says Wilkerson.