An oft heard refrain: I just want to make sure that the small investor isn't hurt. Coincidentally, the definition used for small investor turns out to include the speaker. Though it may sound like I'm picking on BenWP here, my observation is general. Even before reading details of the proposal, I was confident that the proposed change would fall primarily on wealthier investors.
First, because the truly little guy is insulated from capital gain taxation - until one's taxable income exceeds $40,400 (single) or $80,800 (joint), cap gains are taxed at 0%. Second, because (at least as of 2012) only 1/3 of households even had taxable investment accounts, and I think it's a safe bet that these are largely not lower income households. "It is immediately clear that household income has the strongest relationship with taxable account ownership."
https://www.sec.gov/spotlight/fixed-income-advisory-committee/finra-investor-education-foundation-investor-households-fimsa-040918.pdf
The in-kind transaction loophole existed for all forms of businesses (corporations, funds, etc.) since 1935. Congress began narrowing it in 1969. It was little used until ETFs came along and exploited it. It has never made sense from a tax principle perspective - cap gains cannot simply go **poof**. Logically they should either accrue to the company (RIC) or if passed through, to the recipient.

Throughout the history of U.S. investment companies, in-kind distributions have been exempt from tax at the fund level. As Congress began to limit and finally prohibit in 1986 the tax-free distribution of appreciated property by corporations, it continued to specifically exempt open-end funds from this rule. There is scant discussion in the legislative history for the justification for this exemption or why closed-end funds were not also eligible. Perhaps the simplest explanation for the legislative silence is that when [the tax code was changed to narrow the exemption], in-kind distributions from open-end funds were rare.

Jeffrey Colon, The Great ETF Tax Swindle: The Taxation of In-Kind Redemptions, 122 Penn St. L. Rev. 1 (2017)
Abstract: https://ir.lawnet.fordham.edu/faculty_scholarship/722/
Paper: https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=1721&context=faculty_scholarship
As to the proposal, it is simplicity itself. Registered investment companies (OEFs and ETFs) are to be treated the same way as other companies. When they sell holdings, they are to recognize capital gains. Regardless of the form of the sale, i.e. regardless of whether they receive cash or fund shares in exchange for the securities they sell.
No more special cases. No special case because they're conducting an in-kind transaction. No special case because they're an OEF or ETF rather than a CEF.
ETFs would be expected to respond by selling their highest cost shares to the AP (authorized participant) rather than their lowest cost shares. At least if they cared about tax efficiency. That's the same method that OEFs use when raising cash to redeem shares.
Regarding Vanguard: Even before Vanguard started selling VIPERs (Vanguard Index Participation Receipts), their index funds tended to be the most tax efficient on the market. There were many years when their broad based index funds did not distribute cap gains. The proposed change should make Vanguard funds (and ETFs) look even better relative to their competition because of demonstrated skill in minimizing taxes.
Vanguard writes: “the ability of mutual funds and ETFs to transact securities in-kind is a longstanding practice that improves outcomes for millions of investors.” Funds could always transact in-kind.
ETFs fundamentally rely upon this ability in order to keep market price close to NAV. The proposed change does not affect their ability to transact in-kind. OEFs sometimes rely upon this ability as well. It is reasonably well known that Sequoia not only reserves the right to redeem shares in kind, but states explicitly that it is likely to do so for redemptions above $250K. Investors benefit because funds are not forced to conduct fire sales to meet large redemptions.
Sequoia Prospectus: It is highly likely that the Fund will pay you in securities or partly in securities if you make a redemption request (or a series of redemptions) in an amount greater than $250,000.

I think folks interested in having an opinion re the proposed legislation should read the bill and not draw conclusions based on some reporting in the media, even financial media.
BTW, mutual funds can also avoid/minimize distributing capital gains under the current law if they are not lazy. (That is in addition to their ability to do in-kind redemptions.) You can read about it at Liberty Street Funds.

More details from a WSJ article in Apple News, "Democratic Tax Proposal Takes Aim at ETFsBig money managers are bracing for a fight over Senate Finance Committee Chairman Ron Wyden’s proposal"

Senate Finance Committee Chairman Ron Wyden’s proposal aims to tax ETFs’ use of “in-kind” transactions that currently avoids triggering capital-gains taxes. With such in-kind transactions, ETFs—bundles of securities that trade on exchanges—transfer appreciated stock, bonds or other assets to Wall Street intermediaries instead of cash.
By closing a decades-old tax regulation loophole, the proposal stands to eliminate one of the ETF industry’s key selling points: tax efficiency. This proposed change has spurred a rush to mobilize among the largest asset managers, some of whom have built their businesses around the ETF industry.
“ETFs have become big capital gains deferral machines,” said Jeffrey Colon, a professor at Fordham University School of Law who has researched this topic.
ETFs are able to avoid taxes with in-kind transactions thanks to a tax exemption intended for mutual funds, created long before ETFs existed.
“The ability of these funds to do in-kind redemptions of appreciated property is being weaponized and used in a way that Congress surely couldn’t have intended,” he said.
The impact of the proposal would largely fall on ETFs rather than mutual funds, which largely distribute assets to investors in cash.

This proposal does not affect ETFs used in tax-deferred accounts. We still have much to learn on the details of this proposal and how it affects our investment.

Capital Group, the firm that runs American Funds, will be launching six new active ETFs in the first quarter of 2022. It's interesting that these new ETFs will be transparent - holdings will be disclosed daily.

Sven - While officers in companies with publicly traded stock can hold shares of their stocks, their trading in that stock is restricted, and they need to (in theory at least) restrict their trading to periods in which material public information has been disclosed.
If they don't, and it can be shown that they traded on "insider" information, the SEC can force them to "give back" their trading gains, and can also impose penalties, etc.
Wiki link, with references, below. Check out 'Notes' at bottom of page for numerous references to various incidents.
Previously, Fed restrictions on Fed President stock trading had focused upon their trading in the stocks of regulated institutions, i.e., big banks, under the now quaint notion that bank stocks were the primary asset class influenced by the Fed's (regulatory) activities.
The Fed's COVID asset purchases - and Kaplan and Rosengren's trading activity - demonstrate the folly of the original trading restrictions.
https://en.wikipedia.org/wiki/Insider_trading
FWIW, when Alan Greenspan was Fed Chairman (and already wealthy), his personal investments were primarily short term treasury bills, to avoid any apparent conflict of interest. Link to 1998 WSJ article below.
Greenspan Says His Investments Are in Short-Term Treasury Bills
By Jacob M. Schlesinger WSJ | Aug. 18, 1998
https://www.wsj.com/articles/SB903395355927059500

Given the extraordinary COVID Fed response - in which the Fed ended up buying asset classes that they had never previously acquired - unless they sell and put replacement holdings in a blind trust, there will always be a conflict.
When presidential appointees - who may be required or expected to sell the stocks/holdings that they acquired prior to government service or employment - they typically receive a temporary "safe harbor" on the realized gains that would otherwise be realized by that forced sale.
Believe/recall that the taxes on the gains are deferred until the replacement assets (those that they acquired as they began their government service) are sold.
Unclear if such a "safe harbor" (or temporary tax holiday) will apply in the case of Fed bank presidents Kaplan and Rosengren.

Here’s a related article. More complete than what Forsyth’s article contains (Forsyth was trying to cover too many bases in one piece.)
https://www.dallasnews.com/business/banking/2021/09/09/dallas-fed-ceo-robert-kaplan-traded-millions-in-stocks-like-apple-tesla-in-2020/
Excerpted
“Dallas Fed president Robert Kaplan to sell off his holdings in stocks like Apple, Tesla and Amazon”
“The president of the Federal Reserve Bank of Dallas pledged Thursday to sell his holdings in individual stocks such as Apple, Tesla and Amazon by Sept. 30 after his trades totaling millions of dollars in 2020 became public this week. Kaplan and Boston Fed president Eric Rosengren released near-identical statements about their plans to divest their stock portfolios and reinvest in either diversified indexed funds or keep the proceeds as cash. In Kaplan’s case, his trades last year came while he was voting on critical monetary policy for the U.S. during the pandemic.”
“Kaplan, 64, was a voting member of the 12-member policy-setting Federal Open Market Committee last year. The committee rotates the policy-deciding votes among regional bank heads each year. This year, he’s not a voting member. That means he attends the eight yearly FOMC meetings and contributes to discussions but can’t vote. Rosengreen, a voting member this year, listed stakes in four separate real estate investment trusts and disclosed multiple purchases and sales in those and other securities last year. There is precedent for Kaplan and other Fed Presidents to trade stocks while serving on the committee.”
*** This story’s a bit hard to access. But clearing cookies or trying a different browser should work.

Summary prospectus announcing the above change -
https://personal.vanguard.com/pub/Pdf/sp602.pdf?2210173701
Pg 2 -
"The changes to the Funds’ target indexes are not expected to increase Fund
expense ratios. The transition may cause each Fund to realize taxable capital
gains. In the event the transition generates capital gains, the Funds may be
required to distribute capital gains to shareholders.
The Funds are expected to implement the index changes in the third quarter of
2021. The Funds’ prospectuses will be updated at that time to reflect the
changes. To protect the Funds from the potential for harmful “front running” by
traders, the exact timing of the index changes will not be disclosed to investors.
In the meantime, the Funds will continue to seek to track their current indexes."

For now, just an FYI - I received the following Vanguard reply to my enquiry about changes to VDADX's benchmark index
Vanguard has recently selected a new benchmark provider for Vanguard
Dividend Appreciation Index Fund Admiral Shares (VDADX).
VDADX will change its index to the S&P U.S. Dividend Growers Index (S&P
DJI) from the Nasdaq US Dividend Achievers Select Index. The changes will
take effect in the 3rd quarter of 2021.
As part of Vanguard’s ongoing due diligence, we regularly analyze all our
products to ensure that they are delivering on their investment objectives
and giving investors the best chance for investment success. Recently, this
process has highlighted the solid design of the funds, along with some
opportunities for benchmark refinements.
Vanguard has a longstanding partnership with S&P DJI, and employed S&P DJI
benchmarks for 22 index or index-oriented offerings with $1.18 trillion in
assets under management as of March 31, 2020. S&P DJI is a leading provider
of benchmarks and investable indexes designed to help track market
performance, evaluate portfolios, and develop investment strategies.
S&P Dow Jones Indices is a market leader in dividend index strategies, with
more than $91.7 billion in assets under management tracking its dividend
indexes as of March 31, 2021. We believe that S&P DJI’s approach to
dividend growth indexes closely aligns with our view, and that they are
well positioned to administer the indexes for VDADX moving forward.
While we feel that S&P DJI is the optimal partner for VDADX moving forward,
we continue to maintain a significant relationship with Nasdaq, Inc., as a
valuable partner across business lines, including the registration of 24
ETFs encompassing $319.9 billion in assets under management on the Nasdaq
exchange as of March 31, 2021.

Concerning AKREX less financials and more tech, this statement was taken from M* analysis of November 2020. Unlike many computer generated summaries, this was a real analysis of changes there. I invest in this fund for many years, and I am very happy about it, but yes indeed it is more slow now.

Perhaps it’s already been noted, but a clue to how well a find might hold up can be found in its 2008 performance as well as by looking at how it fared during the first quarter of 2020. Of course, not all funds under discussion date back that far. Yahoo Finance does a great job on performance records for the funds that were in existence.

This is a wide ranging review of current thinking about the ongoing transformation. Here are a few examples:

The party Central Committee shifted its economic emphasis “from efficiency to fairness” in late 2020, a researcher at a Beijing think tank wrote in August in Caixin, China’s most prominent business magazine.
The party moved from “early prosperity for some to ‘common prosperity’” and “from capital to labor,” wrote Luo Zhiheng of Yuekai Securities Research Institute. He said leaders are emphasizing science, technology and manufacturing over finance and real estate.
As the previous decade’s economic boom fades, “Xi sees himself as the only person capable of recreating the momentum,” said June Teufel Dreyer, a Chinese politics specialist at the University of Miami.

China chases ‘rejuvenation’ with control of tycoons, society

Good discussion on AKREX. I had almost forgotten about this fund. I just rechecked and another point in its favor is that only dropped about 15% in Feb and March of 2020. I need to study this one again. I’m also interested in looking at its correlation with SPY to see if helps diversify my portfolio more. Like others I am still a bit too heavy on growth — primarily because my 401K equity options are somewhat limited to SPY, EFA and FSMAX. EFA is a more value oriented index but Europe has greatly underperformed US for years

Founding manager of AKREX Chuck Are steped down at the end of 2020. He is 78. The team was preparing for that for a long time, so hopefully they will be just fine. But the focus of the fund was changing lately, less financials, more technology. Time will tell...

I've held AKREX/AKRIX for a number of years and am very pleased with it. It's all about perception and expectation, I believe. If you want a LCG fund with FAANG stocks and other go-go stocks, then AKREX/AKRIX is not the vehicle.
AKREX has performed superbly outside of 2020, when it was in the 87th percentile (-15% of LCG), BY FAR its worst relative performance.
Unfortunately, 2020 skews its multi-year relative category performance ranking. Its annual ranks range from 1% to 29%; YTD 28%. Not bad as far as i am concerned.
Its ten-year rank is in the 17th percentile (20.04%), again good with me. As Graust stated, its a good diversifier for other growth funds. I'll go a step further and say it's a good diversifier for most LCV and LCB funds, particularly S&P500 indexes which are top-heavy with FAANG.
One last point, its Risk/Reward profile for all time frames is exceptional; it's also a GO fund. That's not so say there aren't better funds available, but AKREX/AKRIX is a fund to consider.
Just one man's opinion.
A good discussion, keep the thread alive.
Matt

I do not own any shares in any Primecap managed fund.
Flagship customers can open accounts, investing up to $25K in each. You don't see any reason why one cannot game the system and open[] additonal accounts at Vanguard with different account numbers and put $25K of Primecap and $25K of Capital Opportunity in each account, each year.
If there's nothing stopping one from gaming the system, one could then immediately combine those multiple accounts to meet the $50K Admiral share requirement.
I only gave an existence proof that even if one is not a flagship customer, once one has multiple open accounts they can be combined. Combining them does not violate Vanguard's restriction on opening new accounts (which flagship customers don't have to follow, anyway). Nor does it violate Vanguard's restrictions on buying additional shares.

Now you ask, what prevents me from opening additonal accounts at Vanguard with different account numbers and put $25K of Primecap and $25K of Capital Opportunity in each account, each year?
My answer is nothing.

My answer is that pretty much any fund from any fund company can reject a purchase order that it chooses. Sometimes this is phrased as "a trade that would be disruptive", sometimes not.

Each Vanguard fund reserves the right to reject any purchase request—including exchanges from other Vanguard funds—without notice and regardless of size. For example, a purchase request could be rejected because the investor has a history of frequent trading or if Vanguard determines that such purchase may negatively affect a fund’s operation or performance.

https://personal.vanguard.com/pub/Pdf/p059.pdf?2210168823
Given that Vanguard has limited the amounts one can invest so that purchases don't negatively affect a fund, it's hardly a stretch for Vanguard to consider gaming their rules disruptive.
But if you want to game the system, why stop at $25K/account? Vanguard allows shares to be moved from one account to another existing (not new) account. Sure, it took me over an hour on the phone with Vanguard years ago when I converted some shares in kind from a traditional to a Roth IRA (with existing positions in both accounts), but it can be done.
So open two accounts with $25K, move the shares from one account to the other, then convert the $50K to Admiral shares. Even if you get so far as to open multiple accounts of the same type (e.g. two taxable accounts) in a closed fund, I have my doubts whether Vanguard will then let you take the next step.
Side note: Fidelity once initially rejected a purchase order of mine for a Fidelity fund because it might have been disruptive. (Upon review, Fidelity allowed it to go through.) So this is not a matter of Vanguard being different from other families.

Exactly. Vanguard only allows cancel order early in morning. Other times are not okay even if you call their agents.
I will talk with their Flagship service first to see if I can get into the Investor shares first. Afterward i can add up to $25k per year until reaching the Admiral requirement, $50K.

As Flagship, you can. If you desire, you can purchase $25K of Primecap and $25K of Capital Opportunity between now and the end of the year, and then purchase $25K in each after the first of the year, and convert to Admiral Shares, assuming the total in each is 50K or greater.
Let's have some fun with this and my guess is if you call Vanguard six times, you will get three different answers. This is my understanding:
Let's say that you have your retirement accounts with Vanguard. A Roth, Inherited, and Rollover IRA. You can purchase $25K of Primecap and $25K of Capital Opportunity in each account, each year.
Let's say that you have four taxable accounts with Vanguard, all with different account numbers. You can purchase $25K of Primecap and $25K of Capital Opportunity in each account, each year.
Now you ask, what prevents me from opening additonal accounts at Vanguard with different account numbers and put $25K of Primecap and $25K of Capital Opportunity in each account, each year?
My answer is nothing.

AKREX also lagged large growth in 2020 because it is less exposed to tech than other LG funds (20% in tech per a quick check at Fidelity). And I think this has been generally true over the years…..AKREX finds growth companies mostly outside of tech and holds them for years (low turnover). Good diversifier to other large growth funds, IMHO.

“Top executives of Renaissance Technologies and their spouses have agreed to pay about $7 billion (€5.9 billion) in back taxes and penalties to federal authorities in connection with trades made by the quantitative hedge fund in the largest tax settlement in US history, according to people briefed on the matter. Jim Simons, a mathematician and former cold war codebreaker who founded the fund about four decades ago, will pay an additional $670 million, according to a letter the group sent to investors, which has been seen by the Financial Times.
Dispute
The settlement put an end to a long-running dispute linked to trades made by the firm’s Medallion fund between 2005 and 2015, when several of its executives converted short-term capital gains into long-term profits, which are taxed at a significantly lower rate. Renaissance has also counted among its top executives Robert Mercer, who financed the far-right news website Breitbart and backed several Republican political candidates including former US president Donald Trump.”
(Originally Published in the Financial Times) https://www.irishtimes.com/business/financial-services/executives-at-hedge-fund-renaissance-to-pay-7bn-in-back-taxes-1.4664159