In the second step of its five-part plan to enhance registered
funds regulations, the SEC has proposed new requirements on
portfolio liquidity, risk monitoring, and board oversight.
At an open meeting held on September 22, the US Securities and
Exchange Commission (SEC) unanimously approved a proposal that is
designed to strengthen the management of liquidity risk by certain
registered open-end investment companies, including mutual funds
and ETFs.1 The SEC's proposal creates new Rule
22e-4 under the Investment Company Act of 1940 (1940 Act), which
would require funds to establish a liquidity risk management
program and determine a minimum percentage of net assets that must
be convertible to cash within three days. The SEC's proposal
would also enhance liquidity disclosure requirements, codify SEC
guidance that limits a fund's illiquid investments to 15% of
the fund's net assets, and amend Rule 22c-1 under the 1940 Act
to permit certain funds to use "swing pricing,"
