As anticipated, the Securities and Exchange Commission has extended the compliance date of its redemption fee rule. However, the provision of the rule which requires boards to consider the adoption of a redemption fee policy (FD, March 2005) is now in effect. The compliance date for that aspect of the rule was not changed because the SEC did not receive comment on it, the adopting release says.

The compliance date for the shareholder information agreement provisions of the rule was extended by six months to April 16, 2007. The date by which funds must be able to request and promptly receive shareholder identity and transaction information pursuant to shareholder information agreements was extended for one year to Oct. 16, 2007. "This latter extension is designed to allow additional time for funds, intermediaries, and others to revise their systems to accommodate the request, provision, and use of information from intermediaries after the negotiation of shareholder information agreements," the release says. The information gathering provisions of the rule applies regardless of whether the board chooses to adopt a redemption fee. 

Final Ruling The fund's board of directors, including a majority of directors who are not interested persons of the fund, must either:

(i) Approve a redemption fee, in an amount (but no more than two percent of the value of shares redeemed) and on shares redeemed within a time period (but no less than seven calendar days), that in its judgment is necessary or appropriate to recoup for the fund the costs it may incur as a result of those redemptions or to otherwise eliminate or reduce so far as practicable any dilution of the value of the outstanding securities issued by the fund, the proceeds of which fee will be retained by the fund; or

(ii) Determine that imposition of a redemption fee is either not necessary or not appropriate.