The SEC today proposed sweeping rules to combat abusive mutual fund trading practices, including requiring investors to submit all trades to mutual funds by 4 p.m. Eastern time. However, mutual funds will be allowed to receive trades after 4 p.m. if received by intermediaries, such as the primary transfer agent or a registered securities clearing agency. The SEC also adopted a rule requiring all mutual funds and money managers to have compliance policies and procedures, and an independent compliance officer who would report directly to the board of directors.
In addition, the agency proposed requiring mutual funds to adopt fair-value pricing or updating share prices to prevent time-zone arbitrage by market timers. Mutual funds also would be required to have policies and procedures in place to prevent insider trading and ensure compliance with their stated policies on market timing.
The SEC also is considering requiring funds to levy a redemption fee on rapid-fire trades to discourage market timing and asking investment advisers and mutual funds to adopt codes of ethics to address personal trading by portfolio managers.
The SEC will seek public comments on the proposals for the next 60 days.