Bipartisan House members press SEC official to drop mutual fund reform proposal

investmentnews.com:

Republican and Democratic lawmakers pressed an SEC official Tuesday to drop a mutual fund reform proposal they say would hurt ordinary investors — but they didn’t get the response they wanted.

Bipartisan ire about the measure, which is designed to bolster mutual fund resiliency during times of market stress, was directed at William Birdthistle, director of the SEC investment management division, during a subcommittee hearing of the House Financial Services Committee.

Under the proposal, the Securities and Exchange Commission could impose so-called swing pricing for shares and hard closes for daily transactions that the agency says will protect share value for investors who remain behind when many other investors bolt for the door and sell.

Opponents argue the changes would be so substantial that funds would diminish as investment vehicles for retirement savers and other ordinary investors.

Subcommittee chair Rep. Ann Wagner, R-Mo., told Birdthistle the approximately 3,000 comment letters the agency has received and the breadth of the pushback, which includes trade groups representing investors and the financial industry, demonstrate the extent of the opposition. “Given these facts, are you willing today, sir, at this hearing to pledge to withdraw this rule as written, and if not, why not?”

Birdthistle said the proposal has received “an enormous amount of comments,” including Wagner’s Sept. 5 letter to the agency co-signed by the subcommittee’s ranking member, Rep. Brad Sherman, D-Calif., and dozens of other members of Congress. In that letter, the lawmakers asked the SEC to withdraw the rule.

Birdthistle told Wagner he didn’t have the authority as an SEC division head to scuttle the proposal.

Wagner asked him for his