Mutual funds facing stress from the market turmoil caused by coronavirus will be able to tap their parent asset-management companies and other affiliates for funding under relief announced this week by the Securities and Exchange Commission, the Wall Street Journal reported. The move gives the $19 trillion mutual-fund industry another tool to deal with large swings in redemptions, including borrowing money from the firm that manages the portfolio, according to an SEC order made public on Monday. The SEC’s order, which it said would provide the flexibility until at least June 30, shows how Wall Street’s regulator is rushing to aid firms threatened by the coronavirus shock. While the SEC’s role in a crisis is narrower than the Federal Reserve’s, it plays a key role in gauging market conditions and adjusting rules for brokers, investment advisers, and exchanges. As investors step up the pace of withdrawals, mutual funds could be forced to unload assets at a loss to meet redemptions. Investors pulled $40 billion from taxable bond funds last week alone, and net outflows have totaled $55 billion in the past month, according to Morningstar Direct. By law, investors in open-end mutual funds have a right to receive the closing share price on the day they ask to sell their shares. But a wave of selling can make it difficult for fund managers to raise cash quickly enough to meet those demands.
