The rule was approved in a 3-2 vote, with both Republican commissioners dissenting. Commissioner Mark T. Uyeda, who voted against the rule, expressed "disappointment about the lack of a detailed comment summary," criticizing what he called an "apparent rush to approve this rulemaking."
In another 3-2 vote, the SEC also adopted a new rule proposal aimed at better preparing open-end funds for stressed market conditions. Most notably, the proposal requires any open-end fund, other than a money market fund or ETF, to use a pricing mechanism called "swing pricing."
Swing pricing adjusts a fund's value based on inflows and outflows, so that redeeming shareholders bear the costs of transactions, rather than diluting other shareholders. The proposal would require a hard daily closing time to ensure funds "receive timely flow information, help prevent late trading fund shares and improve order processing," according to an SEC fact sheet.
"The SEC's swing pricing proposal could have an enormous negative impact on the more than 100 million Americans who invest in funds, especially retirement savers," said Eric Pan, ICI's president and CEO, in a statement. "63 percent of 401(k) plan assets are held in mutual funds, and these plans will be severely harmed by the SEC's proposed 'hard close,' which is likely to make it impossible for 401(k) plans to place trade orders for their participants."
The proposed rule would also require most mutual funds to maintain net assets that are at least 10% highly liquid and provide for more frequent and timely public reporting of fund information, according to the fact sheet.