Funds May Use Any Independent Pricing Service for Cross Trades Involving Municipal Securities; SEC Staff Provides Guidance on Best Execution Duty in Cross Trades

The SEC staff recently issued a no-action letter that allows a fund, subject to the approval of its board of directors, to use any appropriate independent pricing service when engaging in Rule 17a-7 transactions involving municipal securities for which market quotations are not readily available. The no-action relief is significant in that it extends a prior staff no-action position, which limited the use of independent pricing services to the one service that was specifically named in a prior no-action letter. The noaction letter also provides general guidance concerning best execution and the duty of loyalty as well as the staff’s view on the use of the Nasdaq Official Closing Price in Rule 17a-7 transactions.

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