The SEC adopted amendments to give regulatory relief to mutual funds in enforcing prohibitions against short-term trading. In October the SEC issued final amendments to a rule requiring funds to negotiate agreements with all broker-dealers or other intermediaries holding shares on behalf of other investors in an “omnibus account.” The agreements require the intermediaries, among other things, to enforce trading restrictions upon individual shareholders.
After the original rule was adopted in 2005 many fund managers told the SEC that identifying all such intermediaries among their shareholders was costly and burdensome. It also was unnecessary, they said, since short-term trading by individual shareholders would be reflected in that of the intermediary. In response the SEC has revised its definition of a financial intermediary to exclude any entity the fund treats as an individual investor. The changes take effect December 4.