Wall Street’s top regulator on Wednesday approved a new rule change that would require mutual funds and exchange-traded funds to report their portfolio holdings monthly instead of four times a year, a move officials say will provide greater transparency to investors.
However, in a departure from previous plans, the U.S. Securities and Exchange Commission is not considering a proposed rule on “swing pricing,” a process designed to protect existing investors in a mutual fund from costs incurred when other investors buy or sell units in the fund. The “swing pricing” rule is considered more substantial but has faced strong industry opposition. The SEC instead offered guidance on how to comply with existing rules.
At a public meeting, the five-member commission voted 3-2 to approve the measure along party lines, with Republicans saying the costs of the change to market participants would outweigh the benefits to regulators and investors.
SEC Chairman Gary Gensler said more frequent reporting would help investors monitor their holdings and identify overlapping investments, while also giving the SEC greater visibility to identify trends and respond to market stress.
“Perhaps we don’t need to be reminded, the past few years have seen market disruptions, in response to the onset of COVID-19, wars abroad, and major bank failures,” he said in prepared remarks.
Under current reporting rules, registered investment management firms are required to file quarterly reports on portfolio holdings with the commission within 60 days of the close of each quarter. But investors only get access to data covering the third month of the quarter.
Under the rule amendments approved Wednesday, the companies would be required to file the reports within 30 days of the end of each month, and each report would be made public after another 30 days.
Republican Commissioner Hester Peirce said the commission did not allow enough public comment to suggest more discomfort from the changes.
“These amendments will provide some limited benefit,” she said, adding that even under the new rules the commission would still have to wait 30 days to get information during market events.
If adopted, the rules would take effect in November of next year, or in May 2026 for mutual funds with net assets of $1 billion or less.
The SEC also issued guidance on compliance with existing rules governing how open-end mutual funds manage liquidity risk.
In such funds, investors can sell their shares back daily.
The previous swing pricing proposal aimed to help open-end funds better withstand market shocks, such as those seen early in the COVID-19 pandemic, by shifting the costs of hasty redemptions to those who cashed out rather than those who stayed in the funds. The agency said last month that it hoped to revise the proposal.
Before the vote, SEC officials told reporters that the guidance issued Wednesday addresses questions such as how often open-end funds should classify their assets for liquidity, meaning how easily they can be sold for cash, and revisits the minimum amount required for highly liquid investments.
