Liquidity Risk Management Program Rule

VIEW AS PDF In late November 2024, the Bank of England published the results of its first system-wide exploratory scenario (SWES) exercise—a year-long effort to model how various financial entities, including non-bank financial intermediaries (NBFIs) and banks, would respond to a significant liquidity shock. While the findings are inherently tied to the specific stress scenario created for the exercise, the results showed that open-end funds (OEFs) and money market funds (MMFs) were neither the catalysts for, nor the primary drivers of, market-wide liquidity stress events. This key takeaway...

Washington, DC, August 28, 2024—Today, Investment Company Institute (ICI) President and CEO Eric Pan released the following statement regarding the Securities and Exchange Commission’s (SEC) vote to adopt changes to Form N-PORT reporting requirements and liquidity risk management program guidance. “ICI has raised serious concerns about moving portfolio holdings disclosure on Form N-PORT from quarterly to monthly, as this will open fund managers to a greater risk of predatory trading that will harm fund shareholders, without any corresponding benefit. ICI has also questioned the SEC’s...

Open-end long-term mutual funds (“funds”) have a long history of successfully managing liquidity, enabling them to meet shareholder redemptions in a timely manner while pursuing their investment objectives. Over the past four decades, 99.94% of these funds have met redemptions, including every single fund during the 2008 global financial crisis and the 2020 dash for cash. Despite this sterling track record, the SEC is worried about funds’ ability to withstand periods of market stress, going so far as to propose a dramatic overhaul of its liquidity risk management rule for funds—stock, bond...