The United States Securities and Exchange Commission (SEC) proposed a reform of the regulations that apply to open investment funds that would force them to have ten percent of their portfolio in very liquid assets to face possible capital outflows in times of stress in the markets.
Open mutual funds are those that people can enter or exit on a daily basis. This freedom can cause liquidity problems and affect both the investors who stay and the capital markets or the general economy, according to the chairman of the SEC, Gary Gensler.
Currently, open-end mutual funds other than money market funds or exchange-traded funds must classify their investments into four liquidity categories. The SEC’s proposal involves modifying this system by including “minimum standards” to consider an investment within each category.
“These changes are designed to help better prepare funds for stress conditions and to prevent them from overestimating the liquidity of their investments,” the SEC said in a statement.
On the other hand, the financial regulator also proposed two modifications regarding pricing. On the one hand, it opted to use a liquidity tool called “swing pricing”, whereby the costs of capital inflows or outflows will be awarded to the investors who participate in said activities, instead of being distributed among all the shareholders. , which dilutes the investment of investors who remain in the fund.
On the other hand, investors’ buy or sell orders in a fund will need to be received by the fund, a transfer agent or a clearing agency at the time the daily price is set in order to receive that price. day for that order. The SEC is confident that this system will prevent late trades and help improve order processing.
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