• SEC Adopts Rule re: Mutual Fund Redemption Fees and Relationships with Intermediaries
  • March 20, 2005
  • Law Firm: Reed Smith LLP - Pittsburgh Office
  • On March 11, 2005, the SEC issued a Release adopting new rule 22c-2 (and making conforming changes to rule 11a-3) that: requires the board of directors or trustees (board) of most registered open-end investment companies (funds) to either: (i) approve a redemption fee that meets certain criteria, or (ii) determine that imposition of such a fee is not necessary or not appropriate; allows funds to impose such a redemption fee, not to exceed 2 percent of the amount redeemed, to be retained by the fund; and requires most funds to enter into written agreements with intermediaries (such as broker-dealers and retirement plan administrators) that hold shares on behalf of other investors, under which the intermediaries must: (i) agree to provide funds with certain shareholder identity and transaction information at the request of the fund, and (ii) carry out certain instructions from the fund.