The SEC's proposal to impose a "hard" 4 p.m. EST deadline for same-day pricing on mutual fund trades spurred a flood of petitions from 401(k) plan administrators and facilitators, calling for modifications to ensure a "level playing field" and protect "Joe six-pack."
As the period for public comment ended Feb. 6, some Securities and Exchange Commission officials insisted the benefits of a hard and fast cutoff time could still outweigh any drawbacks. Robert E. Plaze, the deputy director of the investment division, said his staff was "really stunned (at) the creativity — indeed, the deviousness — in the many different ways" that people were gaming the system. "Hermetically sealing the system" is arguably preferable to half measures that would leave the door open for new, improved scams going forward, he said.
Industry officials said they hope the groundswell of opposition will convince SEC commissioners to settle for a modified 4 p.m. close, an option cited in the SEC position paper that appeared in the Federal Register on Dec. 17. That option would require fund supermarkets and other intermediaries to establish tamper-proof time-stamping of orders and other procedures as a condition to offer investors same-day pricing on orders they forward to mutual fund companies long after the 4 p.m. cutoff time.