SEC Proposes Enhancements to Open-End Fund Liquidity Framework

The Securities and Exchange Commission today voted to propose amendments to better prepare open-end funds for stressed conditions and to mitigate dilution of shareholders’ interests. The rule and form amendments would enhance how funds manage their liquidity risks, require mutual funds to implement liquidity management tools, and provide for more timely and detailed reporting of fund information. “A defining feature of open-end funds is the ability for shareholders to redeem their shares daily, in both normal times and times of stress,” said SEC Chair Gary Gensler. “Open-end funds, though, have an underlying structural liquidity mismatch. This can raise issues for investor protection, our capital markets, and the broader economy.