"I hope that means that we'll really think carefully about even whether we need to move forward with this rule," she said.
The rule proposal, unveiled in November, would require any open-end fund — other than a money market fund or ETF — to use swing pricing, which adjusts a fund's value based on inflows and outflows, so that shareholders engaging in transactions bear the costs, rather than diluting other shareholders.
One controversial aspect of the proposal is the implementation of a hard close, so that funds must receive trades by a certain time, typically around 4 p.m. Eastern time, to execute them at that day's price. In a host of comment letters submitted to the SEC earlier this year, trade associations and industry organizations said the hard close would particularly harm retirement savers who often hold investments through record-keepers, and Ms. Peirce agreed.
"This could have a really concrete effect on retirements, so that's certainly a concern (of mine)," Ms. Peirce said.
"It's going to mean that different investors are being treated differently, in effect, depending on where you live, depending on how you hold your investments," she added.
In a March letter to SEC Chairman Gary Gensler, leaders of the House Financial Services Subcommittee on Capital Markets said the hard close not only disadvantages retirement savers, but specifically harms those living on the West Coast.
While shareholders historically received that day's price as long as they placed an order with their record keeper by 4 p.m. ET, "Retirement plan record-keepers will need to cut off trading for participants several hours earlier (as early as 10 a.m. ET or 7 a.m. PT), to guarantee current day's price, which is unfair for those in the Pacific time zone," Reps. Brad Sherman, D-Calif., and Ann Wagner, R-Mo., wrote in their letter.
The SEC originally proposed implementing swing pricing for money market funds, but decided to drop that requirement in its final rule, which the commission adopted July 12.
On Thursday, Ms. Peirce questioned why the SEC proposed a swing pricing requirement for open-end funds, following pushback to its original proposal aimed at money market funds. "It seemed very odd to me," the commissioner said.
Given all of the changes that swing pricing would cause, it could actually drive investors away from mutual funds altogether, Ms. Peirce added.
Ultimately, the SEC has not done enough work or offered enough "concrete numbers" to prove that swing pricing is necessary for open-end funds, she said. It's worth considering "whether this solution is going to be worse than the problem,", Ms. Peirce added.