SEC Staff Weighing Changes to Redemption Fee and Hard Close Rules
The SEC staff is considering whether to provide special accommodations for pension plan investors in the final mandatory redemption fee and hard close rulemakings.
Specifically, pension plan investors may be permitted to submit trades to a plan administrator by 4 pm, which in turn can submit the trades post-4 pm to the fund or fund’s transfer agent. "It wouldn’t be a blanket exemption to the hard close rule," predicted Ed Ferrigno, vice president of the Profit Sharing/401(k) Council of America. "It would be an exemption if you met a lot of stringent controls and demonstrated to the SEC that you had technology in place" to prevent late trading. He also predicted that the staff will recommend modification of the mandatory redemption fee rule for pension plan investors.
Last week, the Government Accounting Office released a report, "SEC Should Modify Proposed Regulations to Address Some Pension Plan Concerns," in response to a March 2004 request by Representatives Earl Pomeroy (D-ND) and Amo Houghton (R-NY) of the House Ways and Means Oversight Committee. In the course of preparing the report, GAO staffers learned that the SEC staff was planning to make modifications to the hard close and redemption fee rules for pension plan investors. The report does not make specific recommendations, but instead urges the SEC Commissioners to consider the staff’s recommendations.
Of the two proposals, adoption of the mandatory redemption fee will come first, perhaps as early as October.