SEC Proposes Broader Cross-Trading Rules for Registered Funds
The SEC wants to expand the range of securities eligible for cross-trading between registered funds and their affiliates under updated proposed rules.
The Securities and Exchange Commission has proposed amendments to the Investment Company Act's cross-trading rule, a regulation that governs securities transactions conducted directly between a registered fund and its affiliated entities, bypassing open-market exchanges.
The proposed changes would expand the categories of securities eligible for such cross-trades, potentially allowing affiliated funds greater flexibility to transfer holdings without incurring brokerage costs or market impact associated with public transactions. Cross-trading, when properly structured, can reduce transaction expenses for fund shareholders by eliminating intermediary fees.
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Under current rules, cross-trading between affiliated registered funds is permitted only under specific conditions designed to ensure fair pricing and prevent conflicts of interest. The SEC's proposal appears aimed at modernizing those conditions to reflect the broader universe of securities now actively traded by institutional fund managers.
The amendments, if adopted, would alter the regulatory framework that fund advisers and compliance officers rely on when structuring inter-affiliate transactions. Industry participants are expected to weigh in during a public comment period, a standard step in the SEC rulemaking process that allows funds, advisers, and investor advocates to flag potential concerns or support.
The SEC's move comes as regulators continue to scrutinize the investment management industry for potential conflicts of interest while simultaneously seeking to reduce unnecessary friction in markets. Continue reading at Press Releases.
