SEC Press press_release 8 KB 4,595 chars

SEC Adopts Mutual Fund Redemption Fee Rule, Proposes Rule to Define "NRSRO", Approves PCAOB Budget and Reviews FASB Accounting Support Fee

Release: 2005-28

summary

The SEC adopted Rule 22c-2 in 2005 to permit—but not require—mutual funds to impose redemption fees of up to 2% on short-term trades to deter market timing, while mandating intermediaries to share shareholder trading data, with no fraud, charges, or penalties involved.

paragraph

On March 3, 2005, the SEC adopted Rule 22c-2 under the Investment Company Act, allowing mutual funds to impose redemption fees of up to 2% on shares redeemed within seven days to offset costs from short-term trading. The rule requires intermediaries like broker-dealers to provide funds with shareholder trading information to enforce market timing policies, but excludes money market funds, ETFs, and funds that disclose active trading practices. No fraud, misconduct, or financial penalties are associated with this action—it was purely regulatory rulemaking to enhance market integrity and protect long-term shareholders.

narrative

On March 3, 2005, the SEC adopted Rule 22c-2 to address abusive short-term trading in mutual funds by permitting—but not requiring—funds to impose redemption fees of up to 2% on shares redeemed within seven days. The rule mandates that funds enter into agreements with intermediaries (e.g., broker-dealers and retirement plan administrators) to obtain shareholder trading data, enabling them to identify and enforce market timing violations. Funds may choose not to impose fees if they determine they are unnecessary, and the rule explicitly excludes money market funds, exchange-traded funds, and funds that disclose active trading in their prospectuses. The SEC also proposed a definition for 'nationally recognized statistical rating organization' (NRSRO) to clarify regulatory standards for credit rating agencies. Additionally, the Commission approved the Public Company Accounting Oversight Board’s 2005 budget and reviewed the Financial Accounting Standards Board’s annual accounting support fee under the Sarbanes-Oxley Act. These actions were part of routine regulatory oversight aimed at improving market transparency and protecting long-term investors, with no allegations of fraud, misconduct, or financial penalties against any individual or entity.

Enriched metadata

Scheme: non-corporate (100%)

Classified non-corporate(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →

Extracted insights

Entities 6

person fasb accounting support fee
person pcaob budget
agency Securities and Exchange Commission
company that a redemption fee is not necessary or appropriate for the fund
company the fund
person this information

Triples 26

Sec Adopts Mutual Fund Redemption Fee Rule
Sec Proposes Rule To Define Nrsro
Sec Approves Pcaob Budget
Sec Reviews Fasb Accounting Support Fee
The Commission Votes To Adopt New Rule 22c-2 Under The Investment Company Act Of 1940
The Rule Requires The Boards Of Mutual Funds That Redeem Shares Within 7 Days To Adopt A Redemption Fee Of No More Than 2 Percent Of The Amount Of The Shares Redeemed
The Rule Determines That A Redemption Fee Is Not Necessary Or Appropriate For The Fund
The Rule Permit Funds To Impose A Redemption Fee If They Determine That The Fee Is Necessary Or Appropriate To Recoup The Costs That Short Term Trading Can Impose On Funds And Their Long Term Shareholders
Many Funds Adopt Redemption Fees As A Tool To Combat Market Timing And Other Abusive Short Term Trading In Fund Shares
The Rule Not Prevent Funds From Taking Other Steps To Address Such Abusive Trading
The Fund Retain The Proceeds From The Redemption Fees
The Rule Not Require Funds To Impose Redemption Fees Or Set The Amount Of The Fee (Other Than Limiting The Fee To 2 Percent Or Less)
Many Commenters Emphasize That Short Term Trading May Not Impose The Same Costs On All Types Of Funds
The Rule Require Funds That Redeem Share Within Seven Days To Enter Into Agreements With Their Intermediaries Obligating Them To Provide Funds With Shareholder Trading Information
This Information Permit Funds To Identify Shareholders Who Violate The Funds' Market Timing Policies
This Information Oversee The Intermediaries' Assessment Of Any Redemption Fees
The Rule Permit Fund Managers To Determine How Frequently The Fund Asks For This Information
The Rule Include A Provision Requiring That The Agreement Obligate The Intermediary To Respond To Directions From The Fund To Enforce The Fund's Market Timing Policies
The Rule Not Apply To Money Market Funds And Exchange Traded Funds
The Rule Not Apply To Mutual Funds That Encourage Active Trading And Disclose To Investors In The Prospectus That Such Trading Will Likely Impose Costs On The Fund
The Commission Decide To Request Additional Comment On Whether It Should Revise Rule 22c-2 To Require That Any Redemption Fee Conform To Certain Uniform Standards
The Commission's Adoption Of A Uniform (But Not Mandatory) Redemption Fee Might Substantially Reduce The Cost Of Fee Collection
The Commission's Adoption Enable More Intermediaries To Participate In Redemption Fee Programs
The Compliance Date Be 18 Months After Federal Register Publication Of The Release (I.e., Late 2006)
The Deadline For Comments Be 45 Days After Federal Register Publication
The Commission Vote To Propose A Rule That Would Define The Term Nationally Recognized Statistical Rating Organization Or Nrsro

View original SEC press releasesec.gov

Extracted body text (4,595c)

SEC ADOPTS MUTUAL FUND REDEMPTION FEE RULE, PROPOSES RULE TO DEFINE "NRSRO", APPROVES PCAOB BUDGET AND REVIEWS FASB ACCOUNTING SUPPORT FEE FOR IMMEDIATE RELEASE 2005-28 Washington, D.C., March 4, 2005 - On March 3, 2005, the Securities and Exchange Commission voted to adopt a rule concerning mutual fund redemption fees. The Commission also voted to propose a rule defining the term "nationally recognized statistical rating organization; approved the budget for the Public Company Accounting Oversight Board; and reviewed the annual accounting support fee for the Financial Accounting Standards Board (FASB). Mutual Fund Redemption Fees The Commission voted to adopt new Rule 22c-2 under the Investment Company Act of 1940. Voluntary Redemption Fee. The rule will require the boards of mutual funds that redeem shares within 7 days to: adopt a redemption fee of no more than 2 percent of the amount of the shares redeemed; or determine that a redemption fee is not necessary or appropriate for the fund. The rule is designed to permit (but not require) funds to impose a redemption fee if they determine that the fee is necessary or appropriate to recoup the costs that short term trading can impose on funds and their long term shareholders. Many funds have adopted redemption fees as a tool to combat market timing and other abusive short term trading in fund shares. The rule will not prevent funds from taking other steps to address such abusive trading. The fund itself will retain the proceeds from the redemption fees. Unlike the rule that the Commission proposed last year, the rule will not require funds to impose redemption fees, or set the amount of the fee (other than limiting the fee to 2 percent or less). Many commenters emphasized that short-term trading may not impose the same costs on all types of funds. Information Available to Funds. The rule also will require funds that redeem share within seven days to enter into agreements with their intermediaries (such as broker-dealers and retirement plan administrators) obligating them to provide funds with shareholder trading information. This information will permit funds to identify shareholders who violate the funds' market timing policies, and oversee the intermediaries' assessment of any redemption fees. Unlike the rule the Commission proposed last year, the rule will permit fund managers to determine how frequently the fund asks for this information, and will include a provision requiring that the agreement obligate the intermediary to respond to directions from the fund to enforce the fund's market timing policies. Excepted Funds. The rule will not apply to money market funds and exchange traded funds. It also will not apply to mutual funds that encourage active trading and disclose to investors in the prospectus that such trading will likely impose costs on the fund. Request for Additional Comment. The Commission also decided to request additional comment on whether it should revise Rule 22c-2 to require that any redemption fee conform to certain uniform standards. The Commission's adoption of a uniform (but not mandatory) redemption fee might substantially reduce the cost of fee collection and, as a result, enable more intermediaries to participate in redemption fee programs. Without their participation, funds may continue to be unable, as a practical matter, to impose redemption fees in order to protect their shareholders against abusive short term trading. Compliance Date and Deadline for Comments. The compliance date for the rule is 18 months after Federal Register publication of the release (i.e., late 2006). The deadline for comments on the issues raised by the release is 45 days after Federal Register publication. Definition of NRSRO The Commission also voted to propose a rule that would define the term "nationally recognized statistical rating organization" or "NRSRO." The proposing release also will include interpretations with respect to the elements of the proposed NRSRO definition. Comments concerning this proposal should be received by the Commission within 45 days of its publication in the Federal Register. 2005 PCAOB Budget and Accounting Support Fees The Commission voted to approve the budget of the Public Company Accounting Oversight Board, and reviewed the FASB annual accounting support fee, under Section 109 of the Sarbanes-Oxley Act of 2002. *** The full text of detailed releases concerning each of these items will be posted to the SEC Web site as soon as possible. http://www.sec.gov/news/press/2005-28.htm Home | Previous Page Modified: 03/04/2005

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