SEC to Re-Propose Swing Pricing

The Securities and Exchange Commission announced in its spring 2024 agenda that it will likely re-propose its swing pricing proposal for open-end funds. According to the agenda, the target for a re-proposal is April 2025, though the date is not binding.

First proposed in November 2022, the regulatory change would impose mandatory swing pricing on mutual funds. Swing pricing is a method whereby the costs of redeeming shares in a mutual fund are passed on to the redeemer, which can limit the effect of a panic sale in stressful times. The proposal also featured a hard close of trading at 4 p.m. Eastern time, which has been widely criticized as inimical to retirement investors and to any investors in other time zones.

The proposal also contained an alternative based on mandatory liquidity fees, which would impose a redemption fee if a certain net redemption threshold is met. This alternative was actually adopted for money market funds in July 2023. The initial MMF proposal also contained a provision on swing pricing that was dropped.

SEC Chairman Gary Gensler indicated at an Investment Company Institute conference in May that the SEC was considering a similar approach for mutual funds.

The SEC wrote in the regulatory agenda that “the Division is considering recommending that the Commission re-propose changes to regulatory requirements relating to open-end funds’ liquidity and dilution management.”