Vanguard Group has modified its policy on index-fund share exchanges to permit telephone and online exchanges. Limits remain and not all Vanguard funds are included but shareholders will have more flexibility than in the past.

Formerly, shareholders could only request exchanges in non-retirement accounts in writing. Now, they can request exchanges by phone or online, except between 2:30 p.m. and 4:00 p.m. Eastern time on business days. A limit of two such exchanges out of a fund in a rolling 12-month period will be in effect and written exchange requests may be denied if they are deemed excessive. There will be no limit on the number of exchanges into a fund, the company said in a statement.

John Brennan, Vanguard CEO, said in a statement that the company was responding to shareholder requests, but did not want to facilitate market timing. "The strict provisions of the privilege and its full enforcement will deter market-timing activity, thereby protecting the interests of the funds’ long-term investors," he said.

Gus Sauter, managing director of Vanguard Quantitative Equity Group, said in a statement that Vanguard would continue to monitor accounts closely for excessive transaction activity.

The new exchange privileges apply to 20 of Vanguard’s domestic and international stock index funds. Telephone and online exchange privileges for the company’s other 63 stock, bond and balanced funds will remain the same.

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