The SEC's Proposal on Fund Liquidity Is a Work in Progress
A worthwhile effort, but some questions remain.
This May, the SEC released the first of a series of proposals that aim to improve mutual fund reporting. That measure addressed how funds report their holdings and seemed to me to be an unalloyed good.
Last month, the SEC published its second proposal; the subject was “liquidity risk management.” This proposal covers both traditional mutual funds and exchange-traded funds but not money market funds, which are covered by their own, stricter rules. This new measure is also a positive, but, unlike May’s effort, it carries some cons as well as pros.