SEC Adopts New Disclosure Rules For Mutual Funds

By

Washington

Mutual funds will have to disclose enhanced information on expenses, portfolio investments and performance under rules adopted by the Securities and Exchange Commission.

Under the new rules, mutual funds will have to disclose expenses borne by shareholders in terms of costs in dollars associated with a $1,000 investment, based on the funds actual expenses for a reporting period.

In addition, funds will have to disclose the cost in dollars associated with a $1,000 investment, based on the funds actual expense ratio for the period and an assumed return of 5%.

SEC says the first figure is intended to permit investors to estimate the actual costs that they bore over the reporting period.

The second figure, SEC says, is intended to provide investors with a basis for comparing the level of current period expenses of different funds.

The new disclosure was strongly supported by the Investment Company Institute, which said that of all the recent reform initiatives proposed or adopted by the SEC, this one will be the most visible and useful to fund investors.

“Every 6 months, fund shareholders will receive an understandable analysis of their funds annual fees and expenses,” says ICI President Matthew P. Fink.

“Much like the unit price label for groceries at the supermarket, the new disclosures provide an investor-friendly way to compare and understand the impact of mutual fund fees on specific investments on an ongoing basis,” he says.

In addition to expense disclosure, funds will have to file their complete portfolio holdings schedules with the SEC on a quarterly basis. This information will be available to the public through the SECs Electronic Data Gathering, Analysis and Retrieval System (EDGAR).

SEC says this will enable interested investors to monitor whether, and how, funds are complying with their stated investment objectives.


Reproduced from National Underwriter Life & Health/Financial Services Edition, February 13, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.