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Industry Group Asks SEC to Delay Liquidity Rule Implementation

The Investment Company Institute in a recent letter requested that the SEC adjust the compliance schedule and delay certain requirements of the Liquidity Rule by at least one year. The ICI stressed that the rule’s asset classification requirements were especially problematic, and the bucketing information gathered under the rule’s requirements will not be very instructive for the SEC or the public. The ICI detailed results of a survey of its members which revealed varying levels of fund and vendor readiness for the rule, which goes effective in December 2018 for larger fund complexes and in June 2019 for smaller fund complexes. The ICI wrote that the rule’s asset classification, or “bucketing,” requirements have been “the most costly and vexing piece of the rule to implement.” According to the ICI’s survey: the large majority of respondents (91 percent) are considering working with vendors, and most will seek help with bucketing in particular; the majority of survey respondents cited multiple areas in which vendors need to do additional work, including addressing gaps in asset coverage; and the large majority of respondents do not believe vendors’ offerings will be sufficiently mature to make an informed selection until 2018. The ICI also described the critical implementation processes that must occur before fund complexes can present “substantially complete” liquidity risk management programs to their boards for approval. The ICI wrote that the board approval process could add months to the overall implementation process. “The consequence is that regardless of whether the SEC and its staff opt to facilitate compliance through rule amendments or FAQs, a delay of at least one year would be appropriate.”