Congress Pushes Fund Disclosure

An excerpt from the Aug. 19, 2003, issue of The Wa

Rules mandating more frequent updates of mutual-fund holdings may just be months away.

The Securities and Exchange Commission's investment-management division hopes to finalize a rule this fall that would require funds to disclose their holdings quarterly, rather than twice a year, according to Paul Roye, director of the division. That rule, which was proposed at the end of last year, would also include initiatives intended to slim down shareholder reports and increase the amount of information provided to investors about fees that funds charge.

"The shareholder report reform, fee disclosure and holdings disclosures are still priorities and we hope to make final recommendation to the Commission in the fall," Roye wrote.

The rule's progress could dovetail with an Oct. 1 deadline for the SEC to report its progress on fund-disclosure issues set by Reps. Michael G. Oxley (R., Ohio) and Richard H. Baker (R. La.) in a July 30 letter to SEC Chairman William H. Donaldson. The letter was Rep. Baker's latest salvo in his battle to spur the SEC to widen funds' disclosures to shareholders. It followed a previous letter and new legislation on the issue.

If approved as written, the new rule would require mutual funds to disclose their holdings quarterly in public SEC filings, rather than just twice a year each year in shareholder reports. In addition, funds would have to publish the actual fees paid on a hypothetical $10,000 investment over the past six months, rather than listing fees as a percentage of assets. Critics say the current policies make it difficult for the investors to keep tabs on what stocks or bonds their funds own and also complicate understanding the costs of owning a fund.

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