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SEC Expands Fund Disclosure Requirements

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NU Online News Service, Feb. 12, 2004, 12:47 p.m. EST, Washington – Mutual funds are going to have to give customers more information.[@@]

The U.S. Securities and Exchange Commission has adopted rules that require funds to improve disclosures about expenses, portfolio investments and performance.

Under the new rules, mutual funds will have to express shareholder expenses in terms of dollars of expenses for a $1,000 investment, based on the fund’s actual expenses for a reporting period.

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

The SEC says the first figure will help investors estimate the actual costs that they bore over the reporting period.

The second figure will give investors a basis for comparing the level of current period expenses of different funds, the SEC says.

The new disclosure rule was strongly supported by the Investment Company Institute, Washington, 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 fund’s annual fees and expenses,” ICI President Matthew Fink says. “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.”

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 SEC’s Electronic Data Gathering, Analysis and Retrieval System.

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