Mutual funds have been foundational to American investors for the past 100 years. Millions of Californians put their hard-earned dollars in mutual funds and exchange-traded funds (ETFs) to invest for college, a house down payment, and retirement. Mutual funds made investing accessible, presenting the first effective way for the middle class to pool assets to save for their future.

But the Securities and Exchange Commission’s proposed reworking of how mutual funds are priced, bought and sold threatens to permanently damage these products and risk the financial future of over 8 million families in the Golden State.

The SEC wants to require swing pricing, a heavy-handed requirement that would force funds to swing their price, artificially changing their net asset value. While this proposal is already damaging for investors across the country, it’s especially harmful for Californians and other West Coast investors. As part of this aggressive proposal, the agency will force funds to implement a hard close for orders at 1 p.m. PST. Some industry experts even believe this deadline could mean cutting off retirement plan participant trading by 7a.m. PST. On days when funds have a lot of money flowing in, investors would be charged a higher price than normal to invest. On days when funds have money flowing out, investors would receive a lower price than normal when selling their shares.

This expectation that the SEC has set for the West Coast is totally ridiculous. 1 p.m. is the middle of the workday. And if the experts are correct and participant trading is cut off at 7 a.m., we’ll need to make trades before we even have our coffee in the morning. Do they really believe that we can just drop everything we’re doing to meet their biased, East Coast deadlines?

Imagine choosing to sell or buy a portion of your fund shares and not even knowing the final price until the following day because of the time you logged on, forcing you to trade blind. For the millions of households in California who use mutual funds to save for college or retirement, this confusion would become the reality. These price changes could discourage people from investing in mutual funds because it’s uncertain when or by how much their prices might change. Its inherent unfairness has already drawn criticism from both Democratic and Republican members of Congress.

And it’s not just mutual funds that are being targeted by the SEC. Other open-end funds, such as ETFs, would be harmed by the liquidity risk management portion of their proposal. This means that how funds measure their liquidity – or ability to sell their investments – would change significantly, ultimately saddling investors with higher costs, unexpected tax bills and lower returns. It would also make some of the most popular and liquid funds in the world, such as S&P 500 index funds, unviable when they reach a certain size.

The SEC has failed to show how this proposal benefits investors, explain why we need swing pricing or even demonstrate the problem they are trying to solve. There is no evidence that mandatory swing pricing, hard close and liquidity risk management will do much to change investors’ responses to the ups and downs of the economy. Making markets more resilient to the challenges that arise in these situations should be the highest priority for government regulators.

The proposal is not supported by data, nor does it address the costs Californians will face when looking to save for their future. People who have put their trust and hard-earned money into dependable mutual funds may now have to face the harmful consequences of an unnecessary new rule.

The SEC’s proposal is bad news for the financial futures of the 8 million households in California who own mutual funds or ETFs. As the SEC rushes to finalize its proposals ahead of the 2024 election, they need to take a close look at the very people they’re harming with their rules.

Bryan Salazar is a Compton-based real estate agent who collaborates with local families across Los Angeles and the greater Los Angeles area to help guide them towards financial readiness for home purchase.