Florida Regulations 19-11.004: Excessive Trading in the FRS Investment Plan
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(1) Excessive trading by Investment Plan members is prohibited. The United States Securities and Exchange Commission (SEC) has adopted Rule 22c-2. (17 CFR §270.22c-2.), regarding excessive trading for open-end mutual funds. Rule 22c-2 can be obtained by accessing the SEC website at sec.gov and clicking on the Laws and Regulations section. If the mutual funds determine that the member has engaged in excessive trading under the mutual funds’ policies, the mutual funds are entitled to impose redemption fees or prevent trading that violates the mutual funds’ excessive trading policies. It is the responsibility of the member to comply with the trading restrictions permitted by the SEC. Any applicable fees will be deducted directly from the members’ accounts. Funds within the Self-Directed Brokerage Account (“”SDBA””) may have excessive trading rules that are applicable. However, these fund rules are separate and apart from the Investment Plan’s excessive trading policy.
(2) Limitations.
(a) Foreign and global stock funds are subject to a minimum holding of seven (7) calendar days following any non-exempt transfers into such funds.
(b) All authorized investment funds, except for money market funds, stable value funds, and funds within the SDBA, are subject to the following controls:
1. Members who engage in Market Timing Trades (as defined in Fl. Admin. Code R. 19-11.001) in authorized primary funds will receive a warning letter sent by U.S. mail. The warning letter shall notify the member that excessive trades have been identified in the member’s accounts and any additional violations will result in a direction letter and restrictions.
2. Members who engage in Market Timing Trades in authorized primary funds and who have previously received a warning letter described in subparagraph 1. above, will be sent a direction letter delivered by courier. The direction letter shall require that the member shall not have access to automated online trade instructions for at least one full calendar month following the date of the direction letter for all trades involving the primary funds. The member shall be required to conduct trades involving primary funds via telephone by contacting the Investment Plan Administrator for at least one full calendar month. “”One full calendar month,”” in this context, means the full calendar month following the month in which the member engaged in a market timing trade.
3. Members who engage in Market Timing Trades and who have previously received a direction letter, as described in subparagraph 2., above, will be sent another direction letter, delivered by courier. This direction letter shall require that the member shall not have access to automated trade instructions for at least three full calendar months following the date of the direction letter for all trades involving the primary funds. The member shall be required to conduct trades involving primary funds via telephone by contacting the Investment Plan Administrator for at least three full calendar months.
4. Members who engage in Market Timing Trades and who have previously received a direction letter as described in subparagraph 3. above, will be sent another direction letter, delivered by courier. The direction letter will advise the member that the member will only be permitted to conduct trades involving primary funds via paper trading forms for at least three full calendar months following the date of the direction letter. The form to be used by the member in conducting the trades is the “”Transfer Request Form, Excessive Fund Trading Violators,”” Form EFTPV-1, rev. 06-18, http://www.flrules.org/Gateway/reference.asp?No=Ref-14012, which hereby is adopted and incorporated by this reference. The form will be sent to the member by the Plan Administrator with the direction letter. This form must be notarized and returned to the Office of Defined Contribution Programs, via U.S. mail, certified
eturn receipt requested. This form cannot be used to trade in, out or within the SDBA.
5. Members who engage in Market Timing Trades and who have previously received a direction letter as described in subparagraph 4. above, will be sent another direction letter, delivered by courier. The direction letter shall require that the member shall only be permitted to conduct trades involving primary funds via paper trading forms for at least twelve full calendar months following the date of the direction letter. The form to be used by the member in conducting the trades is the “”Transfer Request Form, Excessive Fund Trading Violators,”” Form EFTPV-1, rev. 06-18. This form must be notarized and returned to the Office of Defined Contribution Programs, via U.S. mail, certified
eturn receipt requested.
6. Members who engage in Market Timing Trades and who have previously received a direction letter as described in subparagraph 5. above, will be sent another direction letter, delivered by courier. The direction letter will advise the member that the member will only be permitted to conduct trades involving primary funds via paper trading forms for the remainder of any time that any balance exists in the member’s Investment Plan account following the date of the direction letter. The form to be used by the member in conducting the trades is the “”Transfer Request Form, Excessive Fund Trading Violators,”” Form EFTPV-1, rev. 06-18. This form must be notarized and returned to the Office of Defined Contribution Programs, via U.S. mail, certified/return receipt requested.
7. If the member submits a transfer request form that is incomplete, the form will not be processed. A form is considered as “”incomplete”” if it does not contain the name of the member; does not set forth the social security number of the member; is not notarized; is sent by facsimile, email or regular U.S. mail; does not specify what fund(s), dollar amount(s) or percentages(s) are to be transferred; or does not indicate the fund(s) into which the amounts are to be transferred The form also will be considered “”incomplete”” if there are insufficent assets to execute the transfer(s), or if the requested transfer does not comply with the FRS Investment Plan Excessive Fund Trading Guidelines. Deficiencies are corrected through the resubmission of a transfer request form that is deemed to be complete.
8. Members who receive direction letters and who are placed on restricted trading within their primary funds, as provided in subparagraphs 2., 3., 4., 5., and 6., of paragraph (2)(b), shall be allowed to make automated trades in, out and within the SDBA. Any such member must meet the requirements of the SDBA as provided in Fl. Admin. Code R. 19-11.013 Such member’s activity within the SDBA is not subject to these guidelines, but will be subject to the applicable excessive trading rules and purchase restrictions of the funds in the SDBA.
(3) This subsection contains examples only. This subsection does not contain an exhaustive list of all possible transactions. Members avoiding these examples will not necessarily avoid the impact of this rule since other transactions will meet the definitions of Market Timing Trades or Excessive Trading.
(a) If Member A transfers $50,000.00 out of Fund A and into Fund B on Monday and then transfers $20,000.00 out of Fund B on Tuesday, the transaction is a Roundtrip Trade but is not a Market Timing Trade because the aggregate amount of $75,000.00 has not been met.
(b) If Member A transfers $50,000.00 out of Fund A and into Fund B on Monday and then transfers $55,000.00 out of Fund B on the following Monday, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades in and out of Fund B has exceeded $75,000.00 ($50,000.00 + $55,000.00 = $105,000.00) within a 30 day period.
(c) If Member A transfers $5,000.00 out of Fund A and into Fund B on November 1 and then transfers $25,000.00 out of Fund A and into Fund B on November 3, and then transfers $10,000 out of Fund A and into Fund B on November 5 and then transfers $40,000.00 out of Fund B and into Fund A on November 15, the entire series of transactions constitutes a Roundtrip Trade and is a Market Timing Trade because the aggregate amount of all trades into and out of Funds A and B each exceeded $75,000.00 within a 30 day period.
(d) If Member A transfers $5,000.00 out of Fund A and puts $2,500.00 into Fund B and $2,500.00 into Fund C on December 1 and then transfers $25,000.00 out of Fund A and puts $20,000.00 into Fund B and $5,000.00 into Fund C on December 5, and then transfers $10,000.00 out of Fund A and puts $10,000.00 into Fund C on December 6 and then transfers $23,000.00 out of Fund B and into Fund A and $20,000.00 out of Fund C into Fund A on December 16, the entire series of transactions constitutes a Roundtrip Trade and is a Market Timing Trade because the aggregate amount of all trades into and out of Fund A exceeded $75,000.00 within a 30 day period. It is irrelevant that money has come out of one fund and been transferred into two funds because the money has been returned to the original fund.
(e) Member A transfers $50,000.00 out of Fund A and into a foreign stock fund, which already contains $100,000.00, on October 1, so that on October 1, the foreign stock fund contains $150,000.00. Member A must wait until October 9 to transfer any or all of the $150,000 in funds out of the foreign stock fund.
(f) Member A transfers $250,000.00 in his Investment Plan account that is the subject of a QDRO with the result that the member’s spouse becomes entitled to half of the member’s Investment Plan account. A total of $125,000.00 is transferred from the member’s account to a newly-established account for the member’s spouse and the funds are put into a foreign stock fund on December 1. On December 5, the member’s spouse rolls over the entire $125,000.00 into an IRA. This is neither a Roundtrip Trade nor a Market Timing Trade because the transfer is an exempt transaction, as defined in Fl. Admin. Code R. 19-11.001
(g) Member A transfers $32,000.00 into Fund A on August 5 and then transfers $32,000.00 out of Fund A on August 11 and then transfers $31,000.00 into Fund A on August 17 and finally transfers $31,000.00 out of Fund A on August 18. The entire series of trades are Roundtrip Trades and the trades are also a Market Timing Trade because the aggregate amount of all trades exceeded $75,000.00 within a 30 day period.
(h) If Member A transfers $50,000.00 out of Fund A and into the SDBA on January 2, and then transfers $35,000.00 from the SDBA into Fund A on January 25, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades into and out of Fund A exceeded $75,000.00 within a 30 day period.
(i) If Member A transfers $40,000.00 out of Fund B and into the SDBA on February 15, and then transfers $55,000.00 from Fund C into Fund B on March 3, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades into and out of Fund B exceeded $75,000.00 within a 30 day period.
(4) For all members, Roundtrip and Market Timing Trades are calculated using a rolling 30-calendar day time period. For example, if a trade occurs on May 15 and the following 30-calendar day period, from May 16 through June 14, includes a sufficient number of trades to fit the definition of a Market Timing Trade, this rule shall apply.
Rulemaking Authority Florida Statutes § 121.4501(8). Law Implemented 121.4501(13), (14), (15) FS. History-New 10-21-04, Amended 3-9-06, 10-25-07, 12-8-08, 1-7-10, 7-12-12, 6-5-14, 8-18-14, 12-30-15, 4-12-17, 2-12-18, 2-19-19, 5-11-22.
Terms Used In Florida Regulations 19-11.004
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
(a) Foreign and global stock funds are subject to a minimum holding of seven (7) calendar days following any non-exempt transfers into such funds.
(b) All authorized investment funds, except for money market funds, stable value funds, and funds within the SDBA, are subject to the following controls:
1. Members who engage in Market Timing Trades (as defined in Fl. Admin. Code R. 19-11.001) in authorized primary funds will receive a warning letter sent by U.S. mail. The warning letter shall notify the member that excessive trades have been identified in the member’s accounts and any additional violations will result in a direction letter and restrictions.
2. Members who engage in Market Timing Trades in authorized primary funds and who have previously received a warning letter described in subparagraph 1. above, will be sent a direction letter delivered by courier. The direction letter shall require that the member shall not have access to automated online trade instructions for at least one full calendar month following the date of the direction letter for all trades involving the primary funds. The member shall be required to conduct trades involving primary funds via telephone by contacting the Investment Plan Administrator for at least one full calendar month. “”One full calendar month,”” in this context, means the full calendar month following the month in which the member engaged in a market timing trade.
3. Members who engage in Market Timing Trades and who have previously received a direction letter, as described in subparagraph 2., above, will be sent another direction letter, delivered by courier. This direction letter shall require that the member shall not have access to automated trade instructions for at least three full calendar months following the date of the direction letter for all trades involving the primary funds. The member shall be required to conduct trades involving primary funds via telephone by contacting the Investment Plan Administrator for at least three full calendar months.
4. Members who engage in Market Timing Trades and who have previously received a direction letter as described in subparagraph 3. above, will be sent another direction letter, delivered by courier. The direction letter will advise the member that the member will only be permitted to conduct trades involving primary funds via paper trading forms for at least three full calendar months following the date of the direction letter. The form to be used by the member in conducting the trades is the “”Transfer Request Form, Excessive Fund Trading Violators,”” Form EFTPV-1, rev. 06-18, http://www.flrules.org/Gateway/reference.asp?No=Ref-14012, which hereby is adopted and incorporated by this reference. The form will be sent to the member by the Plan Administrator with the direction letter. This form must be notarized and returned to the Office of Defined Contribution Programs, via U.S. mail, certified
eturn receipt requested. This form cannot be used to trade in, out or within the SDBA.
5. Members who engage in Market Timing Trades and who have previously received a direction letter as described in subparagraph 4. above, will be sent another direction letter, delivered by courier. The direction letter shall require that the member shall only be permitted to conduct trades involving primary funds via paper trading forms for at least twelve full calendar months following the date of the direction letter. The form to be used by the member in conducting the trades is the “”Transfer Request Form, Excessive Fund Trading Violators,”” Form EFTPV-1, rev. 06-18. This form must be notarized and returned to the Office of Defined Contribution Programs, via U.S. mail, certified
eturn receipt requested.
6. Members who engage in Market Timing Trades and who have previously received a direction letter as described in subparagraph 5. above, will be sent another direction letter, delivered by courier. The direction letter will advise the member that the member will only be permitted to conduct trades involving primary funds via paper trading forms for the remainder of any time that any balance exists in the member’s Investment Plan account following the date of the direction letter. The form to be used by the member in conducting the trades is the “”Transfer Request Form, Excessive Fund Trading Violators,”” Form EFTPV-1, rev. 06-18. This form must be notarized and returned to the Office of Defined Contribution Programs, via U.S. mail, certified/return receipt requested.
7. If the member submits a transfer request form that is incomplete, the form will not be processed. A form is considered as “”incomplete”” if it does not contain the name of the member; does not set forth the social security number of the member; is not notarized; is sent by facsimile, email or regular U.S. mail; does not specify what fund(s), dollar amount(s) or percentages(s) are to be transferred; or does not indicate the fund(s) into which the amounts are to be transferred The form also will be considered “”incomplete”” if there are insufficent assets to execute the transfer(s), or if the requested transfer does not comply with the FRS Investment Plan Excessive Fund Trading Guidelines. Deficiencies are corrected through the resubmission of a transfer request form that is deemed to be complete.
8. Members who receive direction letters and who are placed on restricted trading within their primary funds, as provided in subparagraphs 2., 3., 4., 5., and 6., of paragraph (2)(b), shall be allowed to make automated trades in, out and within the SDBA. Any such member must meet the requirements of the SDBA as provided in Fl. Admin. Code R. 19-11.013 Such member’s activity within the SDBA is not subject to these guidelines, but will be subject to the applicable excessive trading rules and purchase restrictions of the funds in the SDBA.
(3) This subsection contains examples only. This subsection does not contain an exhaustive list of all possible transactions. Members avoiding these examples will not necessarily avoid the impact of this rule since other transactions will meet the definitions of Market Timing Trades or Excessive Trading.
(a) If Member A transfers $50,000.00 out of Fund A and into Fund B on Monday and then transfers $20,000.00 out of Fund B on Tuesday, the transaction is a Roundtrip Trade but is not a Market Timing Trade because the aggregate amount of $75,000.00 has not been met.
(b) If Member A transfers $50,000.00 out of Fund A and into Fund B on Monday and then transfers $55,000.00 out of Fund B on the following Monday, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades in and out of Fund B has exceeded $75,000.00 ($50,000.00 + $55,000.00 = $105,000.00) within a 30 day period.
(c) If Member A transfers $5,000.00 out of Fund A and into Fund B on November 1 and then transfers $25,000.00 out of Fund A and into Fund B on November 3, and then transfers $10,000 out of Fund A and into Fund B on November 5 and then transfers $40,000.00 out of Fund B and into Fund A on November 15, the entire series of transactions constitutes a Roundtrip Trade and is a Market Timing Trade because the aggregate amount of all trades into and out of Funds A and B each exceeded $75,000.00 within a 30 day period.
(d) If Member A transfers $5,000.00 out of Fund A and puts $2,500.00 into Fund B and $2,500.00 into Fund C on December 1 and then transfers $25,000.00 out of Fund A and puts $20,000.00 into Fund B and $5,000.00 into Fund C on December 5, and then transfers $10,000.00 out of Fund A and puts $10,000.00 into Fund C on December 6 and then transfers $23,000.00 out of Fund B and into Fund A and $20,000.00 out of Fund C into Fund A on December 16, the entire series of transactions constitutes a Roundtrip Trade and is a Market Timing Trade because the aggregate amount of all trades into and out of Fund A exceeded $75,000.00 within a 30 day period. It is irrelevant that money has come out of one fund and been transferred into two funds because the money has been returned to the original fund.
(e) Member A transfers $50,000.00 out of Fund A and into a foreign stock fund, which already contains $100,000.00, on October 1, so that on October 1, the foreign stock fund contains $150,000.00. Member A must wait until October 9 to transfer any or all of the $150,000 in funds out of the foreign stock fund.
(f) Member A transfers $250,000.00 in his Investment Plan account that is the subject of a QDRO with the result that the member’s spouse becomes entitled to half of the member’s Investment Plan account. A total of $125,000.00 is transferred from the member’s account to a newly-established account for the member’s spouse and the funds are put into a foreign stock fund on December 1. On December 5, the member’s spouse rolls over the entire $125,000.00 into an IRA. This is neither a Roundtrip Trade nor a Market Timing Trade because the transfer is an exempt transaction, as defined in Fl. Admin. Code R. 19-11.001
(g) Member A transfers $32,000.00 into Fund A on August 5 and then transfers $32,000.00 out of Fund A on August 11 and then transfers $31,000.00 into Fund A on August 17 and finally transfers $31,000.00 out of Fund A on August 18. The entire series of trades are Roundtrip Trades and the trades are also a Market Timing Trade because the aggregate amount of all trades exceeded $75,000.00 within a 30 day period.
(h) If Member A transfers $50,000.00 out of Fund A and into the SDBA on January 2, and then transfers $35,000.00 from the SDBA into Fund A on January 25, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades into and out of Fund A exceeded $75,000.00 within a 30 day period.
(i) If Member A transfers $40,000.00 out of Fund B and into the SDBA on February 15, and then transfers $55,000.00 from Fund C into Fund B on March 3, the transaction is a Roundtrip Trade and a Market Timing Trade because the aggregate amount of all trades into and out of Fund B exceeded $75,000.00 within a 30 day period.
(4) For all members, Roundtrip and Market Timing Trades are calculated using a rolling 30-calendar day time period. For example, if a trade occurs on May 15 and the following 30-calendar day period, from May 16 through June 14, includes a sufficient number of trades to fit the definition of a Market Timing Trade, this rule shall apply.
Rulemaking Authority Florida Statutes § 121.4501(8). Law Implemented 121.4501(13), (14), (15) FS. History-New 10-21-04, Amended 3-9-06, 10-25-07, 12-8-08, 1-7-10, 7-12-12, 6-5-14, 8-18-14, 12-30-15, 4-12-17, 2-12-18, 2-19-19, 5-11-22.