Next week, the Securities and Exchange Commission will vote on a revised rule that allows mutual funds to impose a 2% redemption fee on mutual fund shares that are traded in within five days of purchase, Dow Jones reports. Originally, the SEC sought to impose a mandatory fee, eventually changing its proposal to a voluntary rule.

Such a redemption fee is designed to deter market timing, which can impose additional trading costs on long-term investors in funds. Market timing is typically a problem in funds that invest in foreign markets and domestic small-cap companies.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.