IDC Update

IDC Update: November 10, 2022

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SEC Proposes Swing Pricing for All Mutual Funds and Liquidity Rule Amendments

The Securities and Exchange Commission (SEC) recently approved, by a 3-2 vote, a proposal that would, among other things:

  • Require all open-end funds (other than money market funds and ETFs) to adopt swing pricing, which would adjust a fund’s NAV per share by a swing factor when the fund experiences net redemptions or when net purchases exceed a threshold;
  • Impose a “hard close” so that an investor’s order to purchase or redeem a fund’s shares would be eligible for a given day’s price only if the fund, its transfer agent, or a registered clearing agency receives the order before the time as of which the fund calculates its NAV, typically 4 p.m. ET;
  • Provide additional standards for making liquidity determinations, amend certain aspects of the liquidity categories, and require more frequent liquidity classifications.

Comments on the proposal are due 60 days after its publication in the Federal Register. IDC has strong concerns regarding this proposal and plans to discuss the proposal with the SEC and submit a comment letter.

SEC Adopts Rule Amendments for Summary Shareholder Reports

The SEC recently adopted rule amendments that will require open-end funds to (1) create and transmit summary shareholder reports highlighting key information and (2) tag the contents of shareholder reports in a structured data language. In addition, the amendments will preclude open-end funds from satisfying shareholder report transmission requirements by making the reports and other materials available online and providing a notice of that availability, as many currently do. The amendments also will prevent open-end funds from preparing a single shareholder report for multiple series and will require that they prepare and transmit to shareholders a report that covers only the specific class of fund in which a shareholder is invested. ICI’s Memorandum summarizing the amendments is available here (login required).

ICI Publishes Research Reports on Characteristics of Mutual Fund Investors, Ownership of Mutual Funds, and Shareholder Sentiment

ICI recently published research reports on the “Characteristics of Mutual Fund Investors, 2022” and “Ownership of Mutual Funds and Shareholder Sentiment, 2022.” The reports reflect ICI’s findings that 52.3 percent of households in the United States own mutual funds in 2022. ICI also found that almost all mutual fund–owning households were focused on retirement saving. In addition, ICI determined that mutual fund–owning households’ risk appetite is higher than other households, reflecting long-term investment mindsets.

Register Now for IDC Chapter Meeting in New York

Registration is open for IDC’s Chapter meeting in New York on Wednesday, November 16, 10:00 a.m. to 2:00 p.m. (ET) at Baker McKenzie in New York City. The meeting provides directors an opportunity for peer-to-peer sharing. In addition, Jen Klass, Partner at Baker McKenzie, will discuss distribution trends in the asset management industry and the impact on funds and fund directors. Register HERE.

Directors attending the chapter meeting also may want to attend ICI’s Spotlight on Closed-End Funds event immediately after the chapter meeting and ICI’s Closed-End Fund Conference the following day, both in New York City. The pre-conference Spotlight on Closed-End Funds will explain what you want to know about closed-end funds—how they operate, how they might benefit investors, and some of their most pressing issues. Registration for the Spotlight event is complementary for independent directors of ICI member funds.

Mark Your Calendar for Upcoming Events

All times are shown in eastern time (ET), unless otherwise noted.

Chapter Meetings

Foundations for Fund Directors®

  • January 11–12 (Virtual)
  • June 13–14 (Washington, DC)

Conference

Please contact Paul Mussoni for additional information. A list of IDC events can be found on IDC’s website.