[JURIST] The US Securities and Exchange Commission (SEC) [official website] set new rules [press release] on Thursday establishing new liquidation risk management rules for mutual funds and exchange-traded funds (ETF). The industry will now be required [Reuters report] to establish programs that protect shareholders in the event that investors suddenly sell off their assets. The SEC proposes that the rules apply stricter standards to the industry, however some leeway has been given to ETF holders. While funds will have to be categorized on a four-tiered scale based on liquidity, the previous form of this rule set six stricter tiers. Stricter rules set thresholds for the amount of assets that can be classified as illiquid or must be available for cash conversion, however ETF holders are left to determine what happens when these thresholds are not met. ETF’s that honor securities redemptions may also be exempt from the cap on highly liquid and liquid assets. The SEC will later address the use of derivatives in funds. The rules will begin affecting large funds in December 2018 and small funds in June 2019.

The enforcement of securities regulations continues to be a major concern in the US. Earlier this month, the US District Judge Amos L. Mazzant III conditionally dismissed [JURIST] an SEC suit against Texas Attorney General Ken Paxton for misleading investors. Also this month a hedge fund manager agreed [JURIST] on a settlement agreement for SEC charges imposed for a widespread scheme involving the bribery of officials in the Democratic Republic of Congo (DRC) and Libya. Last month Wells Fargo [corporate website] shareholders filed suit [JURIST report] against the banking conglomerate over their allegedly deceptive sales practices.