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SEC Extends Liquidity Rule Deadline for Open-End Funds

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The Securities and Exchange Commission voted Wednesday to extend by six months the deadline for open-end funds’ compliance with provisions of the Commission’s liquidity risk management program rule. 

Funds now have more time to implement the final rule’s classification requirement, along with specified other elements that are tied to the classification requirement.

The compliance date for implementing the classification and classification-related elements of the liquidity rule is June 1, 2019, for larger fund groups, and Dec. 1, 2019, for smaller fund groups. 

However, other investor protection provisions of the rule, including requiring funds to adopt a liquidity risk management program and to limit illiquid investments to 15% of the fund’s portfolio, will go into effect as originally scheduled: Dec. 1, 2018, for larger fund groups, and June 1, 2019, for smaller fund groups.

“Management of liquidity risks is important to funds’ ability to meet their statutory obligation — and their investors’ expectations — regarding redemption of their shares,” the SEC stated.

Susan Olson, general counsel for the Investment Company Institute, said that ICI members “are working diligently and taking the steps necessary to complete systems to implement the new requirements, and this [SEC] action will provide critical time to help ensure compliance with the new rule.”

Since the rule’s adoption in October 2016, SEC says, staff has engaged in “extensive outreach” to identify potential issues associated with the effective implementation of the rule.

Also issued Wednesday by the agency is a set of FAQs related to the liquidity rule, focusing on questions that have arisen with respect to the liquidity classification process. 

These FAQs are designed to provide additional clarity to funds as they implement the final rule.

The SEC said that it also anticipates considering proposed amendments to Form N-PORT and Form N-1A related to disclosures of liquidity risk management for open-end management investment companies.


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