SEC proposes new fund liquidity rules on redemption fears

Regulators fear rush to the exit

Laura Dew
clock •

The US Securities and Exchange Commission has voted to develop new rules to help funds manage liquidity risk, ensuring money is returned to investors quickly if they rush to redeem their holdings.

Five commissioners of the SEC voted unanimously on rules to improve disclosure standards for mutual funds and exchange traded funds to ensure they can manage liquidity risk, according to the Financial Times. The regulators are concerned these products are particularly vulnerable in times of extreme market stress, as investors may choose to rush for the exit all at the same time. If a fund or ETF is holding illiquid assets as investors begin to redeem their holdings, it may experience problems selling out of these. The SEC is particularly worried about bond funds, which investors have ...

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