SEC proposes amendments to Investment Company Act's cross-trading rule
Summary
The SEC has proposed amendments to the Investment Company Act’s cross-trading rule, which allows registered funds to engage in direct securities transactions with affiliates. This change is intended to improve market efficiency by avoiding open-market transaction costs that could be detrimental to shareholders. Additionally, the proposal introduces enhanced investor protections, including modernized pricing conditions and greater board oversight, to reduce risks associated with these transactions. These amendments also aim to address prior restrictions from a 2020 valuation rule that limited fixed-income cross-trading, reflecting the SEC's ongoing efforts to modernize regulatory frameworks in response to current market conditions.
Analysis
US Securities and Exchange Commission: The US Securities and Exchange Commission is the primary federal agency responsible for enforcing securities laws and regulating the nation's securities markets and exchanges. Under Chairman Paul S. Atkins, the agency proposed amendments on October 9, 2026, to modernize Rule 17a-7 under the Investment Company Act, expanding the scope of permitted cross-trades by registered funds and their affiliates to restore access to most fixed-income securities while adding updated pricing, oversight, and aggregated reporting requirements. Market Efficiency: Cross-trading under the amended rule enables registered funds to trade securities directly with affiliates, avoiding open-market transaction costs that would otherwise be passed on to shareholders. Investor Protection: The proposal introduces enhanced safeguards, including modernized pricing conditions and board oversight, to mitigate risks such as cherry-picking while expanding eligible securities. Regulatory Modernization: The amendments address restrictions from a 2020 valuation rule that had limited fixed-income cross-trading, reflecting ongoing efforts to update frameworks for current market conditions and pricing transparency.
Categories
politicscryptotech
Related sources
- https://www.sec.gov/newsroom/speeches-statements/uyeda-statement-interval-fund-modernization-093026
- https://www.sec.gov/rules-regulations/2026/10/s7-2026-36
- https://x.com/i/status/2106160541039497358
- https://www.hklaw.com/en/insights/publications/2026/10/proposed-sec-amendments-aim-to-expand-retail
- https://www.gibsondunn.com/sec-advances-responsible-retailization-package-of-rule-proposals/
- https://www.sidley.com/en/insights/newsupdates/2026/10/rethinking-retail-sec-proposes-an-alternatives-shakeup
- https://www.assetservicingtimes.com/assetservicesnews/www.assetservicingtimes.com/assetservicesnews/regulationarticle.php?article_id=18436
- https://www.sec.gov/newsroom/press-releases/2026-104-sec-proposes-expanding-securities-eligible-cross-trading-registered-funds
- https://www.sec.gov/newsroom/speeches-statements/uyeda-100926-statement-proposed-amendments-cross-trading-rules
- https://x.com/i/status/2105988390521012666
- https://www.ici.org/ici-viewpoints/crosstrading-reform-unlocking-savings-and-efficiency-for-funds-and-investors
- https://www.paulweiss.com/insights/client-memos/sec-proposes-to-modernize-custody-rules-and-further-expand-retail-investor-access-to-private-funds-and-alternative-investments
- https://x.com/i/status/2106291468784558445
- https://x.com/i/status/2105757989130932295
- https://www.ici.org/news-release/ici-lower-costs-strong-protections-with-secs-cross-trading-proposal