The Investment Adviser Association and the Investment Company Institute, the leading trade association for mutual funds, are balking at a proposed Securities and Exchange Commission rule restricting the holdings of derivatives by mutual funds.

Both groups said the proposal would harm investors and make it more difficult for fund advisors to manage risk in public comments submitted to the SEC late Monday night, the last official day for comments, .

“[Limiting derivatives] will reduce investor access to certain types of funds and portfolio strategies—including some that serve to mitigate investment risk,” said IAA General Counsel Bob Growhowski in the association’s review of the proposal.

While supporting the SEC’s aims in the new rule to modernize decades-old guidelines on alternative investments and make sure the funds don’t expose investors to excessive risk, ICI President and CEO Paul Stevens warned the portfolio limits would stymie funds’ efficient and effective portfolio management and harm shareholders.

On Tuesday, SEC Chair Mary Jo White said finalizing the rule will be an SEC priority this year.

In the past she has noted the restrictions on sometimes hard-to-sell alternatives holdings are essential to making sure investors can get their money out of the funds in times of stressful financial markets.

IAA said it is particularly concerned the rule would add substantial undue compliance costs to smaller fund advisors.

“The commission should consider ways to ensure that this burden falls only on those funds with greatest risk to investors from the use of derivatives,” Bob Growhowski said.

He said one of the provisions that would hit smaller funds hard is a requirement that any fund with derivatives transactions exceeding 50 percent of the value of the fund’s net assets or any complex derivatives implement a derivatives risk management program.

Limiting the amount of derivatives mutual funds can hold to ensure investors can get their money out is unnecessary because of a section in the proposal that requires the funds to segregate more than enough assets than needed to exit derivatives transactions, he added.