SEC Gives Final Passage to 22c-2 Changes

September 28, 2006 (PLANSPONSOR.com) - Federal regulators this week gave final approval to the much anticipated redemption fee rule amendments designed to help funds enforce bans against market timing and other abusive trading practices.

The Securities and Exchange Commission (SEC) took the action on proposed Rule 22c-2 amendments, according to an SEC Web site statement, including delaying their effective dates.

The rule, which the SEC originally adopted in 2005 (See   Timers’ Trading Could be Cut Back under New Rule ) , mandates that most funds execute shareholder information agreements with intermediaries, such as broker-dealers, that hold shares on behalf of other investors.

According to regulators, the agreements will provide funds access to information about the identity of customers involved in such transactions, including those made through omnibus accounts. The mandate rule also requires fund boards of directors to consider whether a redemption fee policy is appropriate for their funds.

Regulators said in the statement that the amendments clarify the operation of the rule, and reduce the number of shareholder information agreements that funds must enter into with their intermediaries.

The original rule was set to kick in on October 16, 2006. The newly approved changes extend the compliance date for entering into shareholder information agreements by six months, until April 16, 2007. The date by which funds must be able to obtain information from intermediaries under those agreements will be extended by a year until October 16, 2007.

In their comments to regulators, some industry trade groups had pushed for more time to get ready for the new procedures (See   SIA Asks for Clarification on Redemption Fee Rule Amendments).   The final version of the rule is   here .

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