What is the cut-off time to get a day's mutual fund prices?

[Peter Gulia]

In my experience (with plans, recordkeepers, and SEC-registered investment companies), a participant's investment direction received by the plan's recordkeeper before 4:00 New York (Eastern) Time is treated as timely received to get the open-end mutual fund prices later determined for that day.

Are there any circumstances in which a recordkeeper could allow a later cut-off time?

If so, does anyone allow a later cut-off time?

Or do all recordkeepers set 4:00 as the time for all funds?

 

 

[MoJo]

Any order taken after the close of the NYSE (whenever that is - and it may be earlier than 4:00 p.m. EST) cannot be processed with that day's NAV - and would be considered an order for the next business day.  I believe that may be a regulatory (if not legislative) mandate - as it would give the astute investor the ability to sell or buy based on after market close information and still get the fixed price established (though not necessarily calculated) as of the close.

My experience is that recordkeepers and other intermediaries operate as "sub-transfer" agents to the fund's transfer agent and are strictly required to adhere to the timing standards by the transfer agent/mutual fund/SEC.

[Peter Gulia]

MoJo’s experience is correct.

 

The idea that a registered investment company must not allow a redemption of a security (such as a fund share) at a price other than one based on the current net asset value next computed after the RIC or its agent received the order to buy or sell the security is in public law, including Investment Company Act Rule 22c-1 (17 C.F.R. § 270.22c-1).

 

And a RIC’s service providers use agreements to conform a retirement-services provider’s agency to those rules (and other rules under the Securities Exchange Act of 1934).

 

But the Investment Company Act rule to define “current net asset value” (17 C.F.R. § 270.2a-4) doesn’t directly specify the close-of-trading on the New York Stock Exchange as a fund’s valuation time.

 

While NYSE-close is the mainstream convention, has anyone seen any fund allow a later cut-off time?

 

[MoJo]

Well, to directly answer your question, then, "No."  I haven't seen anyone allow a later cut off.time.  I have seen some rk shops use an earlier time (but I believe they may not have been operating as a sub-t/a and hence had to get orders to the t/a or sub-t/a by 4:00), but not recently.  I think the answer may lie in how "listed" securities are priced - and the time at which the price is fixed - for purposes of determining the NAV f the RIC.  After a very cursory google search it appears the "other" exchanges "close" at 4:00 ET (or the NYSE close time) and only conduct business after that time as an "after-hours" exchange.  Where the rules on NAV calculation, and whether there is a rule that the price as of the close of the NYSE is the price to be used, I couldn't tell you.

[Pam Shoup]

Some of the cut off times are also established by the types of investments in the plan and the practices of the NSCC trader.  For example, our main NSCC trader requires that they have the trades submitted to them by 3:30 each day for ETFs as they trade in real time so we have an earlier cut off time.  Since the files process overnight for same day late day trading for mutual funds,, we have to certify to the various NSCC traders that we did not accept any mutual fund trades after 4:00pm, which is why you should not see later cut off times.