OTHER MUTUAL FUND ISSUES



After the market timing and late trading investigations of certain mutual fund complexes by Federal and state regulators, the SEC initiated a series of rulemakings to address several outstanding issues.

 

In January 2004, the SEC proposed a new rule to create a code of ethics for registered investment advisers. The code of ethics for each investment adviser would set forth standards of conduct expected of advisory personnel, safeguard material nonpublic information about client transactions, and address conflicts that arise from personal trading by advisory personnel. This proposed rule was finalized by the SEC in July 2004.

 

In February 2004, the SEC issued a proposed rule to prohibit mutual funds from paying for the distribution of their shares with portfolio brokerage commissions. Mutual funds buy and sell large amounts of securities for their portfolios and, for many years, it was a common practice for fund advisers to use commissions to reward broker-dealers for promoting and selling shares of the funds they manage. Using brokerage commissions in this manner creates a significant conflict of interest and the rule would end this practice. This rule was finalized by the SEC in September 2004.

 

In February 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds about how their boards of directors evaluate and approve--and recommend shareholder approval of--investment advisory contracts. This SEC proposal would require a mutual fund to provide disclosure in its reports to shareholders regarding the material factors and the conclusions with respect to those factors that formed the basis for the board's approval of advisory contracts. The SEC rule on this issue was finalized in June 2004.  

 

In March 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds regarding their portfolio managers. The proposed rule would extend the existing requirement that a mutual fund provide basic information in its prospectus about its portfolio managers to include the members of management teams. The proposed rule also would require a mutual fund to disclose additional information about its portfolio managers, including other accounts they manage, compensation structure, and ownership of securities in accounts they manage. This SEC rule was finalized in August 2004.

 

  

  • SEC Final Rule: Prohibition on the Use of Brokerage Commissions to Finance Distribution
    On September 2, 2004, the SEC issued a final rule to prohibit mutual funds from paying for the distribution of their shares with brokerage commissions. The final rule is designed to end a practice that poses significant conflicts of interest and may be harmful to funds and fund shareholders.
  • SEC Issues Final Rule on Portfolio Manager Disclosure
    On August 23, 2004, the SEC issued its final rule to improve the disclosure provided by mutual funds regarding their portfolio managers. The final rule extends the existing disclosure requirements regarding portfolio managers to members of management teams. The rule also requires a mutual fund to disclose additional information about its portfolio managers, including other accounts that they manage, compensation structure, and ownership of securities in the investment company.
  • SEC Final Rule: Codes of Ethics for Investment Advisers
    On July 2, 2004, the SEC issued a final rule requiring registered investment advisers to create and adopt codes of ethics. Under the final rule, the codes of ethics must set forth standards of conduct expected of advisory personnel and address conflicts that arise from personal trading by advisory personnel. Among other things, the rule requires certain employees of an adviser to report their personal securities transactions, including transactions in any mutual fund managed by the adviser.
  • SEC Final Rule on Disclosure of Investment Advisory Contracts
    On June 23, 2004, the SEC issued a final rule to improve the disclosure provided by mutual funds about how their boards of directors evaluate and approve, and recommend shareholder approval of, investment advisory contracts. The final rule requires mutual funds to provide disclosure in its reports to shareholders regarding the material factors and the conclusions with respect to those factors that formed the basis for the board’s approval of advisory contracts during the most recent fiscal half-year. The final rule also is designed to encourage improved disclosure in proxy statements regarding the basis for the board’s recommendation that shareholders approve an advisory contract.
  • Proposed SEC Rule Regarding Portfolio Manager Disclosure
    On March 11, 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds regarding their portfolio managers. The proposed rule would extend the existing requirement that a mutual fund provide basic information in its prospectus regarding its portfolio managers to include the members of management teams. The proposed rule would also require a mutual fund to disclose additional information about its portfolio managers, including other accounts they manage, compensation structure, and ownership of securities in accounts they manage.
  • SEC Proposed Rule: Prohibition on the Use of Brokerage Commissions to Finance Distribution
    On February 24, 2004, the SEC issued a proposed rule to prohibit mutual funds from paying for the distribution of their shares with brokerage commissions. The proposed rule would end a practice that is fraught with conflicts of interest and may be harmful to funds and fund shareholders.
  • SEC Proposed Rule on Disclosure Regarding Investment Advisory Contracts
    On February 11, 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds about how their boards of directors evaluate and approve--and recommend shareholder approval of--investment advisory contracts. The SEC proposal would require a mutual fund to provide disclosure in its reports to shareholders regarding the material factors and the conclusions with respect to those factors that formed the basis for the board’s approval of advisory contracts during the reporting period.
  • SEC Proposed Code of Ethics for Investment Advisers
    On January 20, 2004, the SEC issued a proposed rule to create a code of ethics for registered investment advisers. As proposed, the code of ethics would set forth standards of conduct expected of advisory personnel, safeguard material nonpublic information about client transactions, and address conflicts that arise from personal trading by advisory personnel. Among other things, the rule would require certain employees of an adviser to report their personal securities transactions, including transactions in any mutual fund managed by the adviser.

After the market timing and late trading investigations of certain mutual fund complexes by Federal and state regulators, the SEC initiated a series of rulemakings to address several outstanding issues.

 

In January 2004, the SEC proposed a new rule to create a code of ethics for registered investment advisers. The code of ethics for each investment adviser would set forth standards of conduct expected of advisory personnel, safeguard material nonpublic information about client transactions, and address conflicts that arise from personal trading by advisory personnel. This proposed rule was finalized by the SEC in July 2004.

 

In February 2004, the SEC issued a proposed rule to prohibit mutual funds from paying for the distribution of their shares with portfolio brokerage commissions. Mutual funds buy and sell large amounts of securities for their portfolios and, for many years, it was a common practice for fund advisers to use commissions to reward broker-dealers for promoting and selling shares of the funds they manage. Using brokerage commissions in this manner creates a significant conflict of interest and the rule would end this practice. This rule was finalized by the SEC in September 2004.

 

In February 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds about how their boards of directors evaluate and approve--and recommend shareholder approval of--investment advisory contracts. This SEC proposal would require a mutual fund to provide disclosure in its reports to shareholders regarding the material factors and the conclusions with respect to those factors that formed the basis for the board's approval of advisory contracts. The SEC rule on this issue was finalized in June 2004.  

 

In March 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds regarding their portfolio managers. The proposed rule would extend the existing requirement that a mutual fund provide basic information in its prospectus about its portfolio managers to include the members of management teams. The proposed rule also would require a mutual fund to disclose additional information about its portfolio managers, including other accounts they manage, compensation structure, and ownership of securities in accounts they manage. This SEC rule was finalized in August 2004.

 

  

Document Title: 
SEC Final Rule: Prohibition on the Use of Brokerage Commissions to Finance Distribution
Document Desc: 
On September 2, 2004, the SEC issued a final rule to prohibit mutual funds from paying for the distribution of their shares with brokerage commissions. The final rule is designed to end a practice that poses significant conflicts of interest and may be harmful to funds and fund shareholders.
Document Title: 
SEC Issues Final Rule on Portfolio Manager Disclosure
Document Desc: 
On August 23, 2004, the SEC issued its final rule to improve the disclosure provided by mutual funds regarding their portfolio managers. The final rule extends the existing disclosure requirements regarding portfolio managers to members of management teams. The rule also requires a mutual fund to disclose additional information about its portfolio managers, including other accounts that they manage, compensation structure, and ownership of securities in the investment company.
Document Title: 
SEC Final Rule: Codes of Ethics for Investment Advisers
Document Desc: 
On July 2, 2004, the SEC issued a final rule requiring registered investment advisers to create and adopt codes of ethics. Under the final rule, the codes of ethics must set forth standards of conduct expected of advisory personnel and address conflicts that arise from personal trading by advisory personnel. Among other things, the rule requires certain employees of an adviser to report their personal securities transactions, including transactions in any mutual fund managed by the adviser.
Document Title: 
SEC Final Rule on Disclosure of Investment Advisory Contracts
Document Desc: 
On June 23, 2004, the SEC issued a final rule to improve the disclosure provided by mutual funds about how their boards of directors evaluate and approve, and recommend shareholder approval of, investment advisory contracts. The final rule requires mutual funds to provide disclosure in its reports to shareholders regarding the material factors and the conclusions with respect to those factors that formed the basis for the board’s approval of advisory contracts during the most recent fiscal half-year. The final rule also is designed to encourage improved disclosure in proxy statements regarding the basis for the board’s recommendation that shareholders approve an advisory contract.
Document Title: 
Proposed SEC Rule Regarding Portfolio Manager Disclosure
Document Desc: 
On March 11, 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds regarding their portfolio managers. The proposed rule would extend the existing requirement that a mutual fund provide basic information in its prospectus regarding its portfolio managers to include the members of management teams. The proposed rule would also require a mutual fund to disclose additional information about its portfolio managers, including other accounts they manage, compensation structure, and ownership of securities in accounts they manage.
Document Title: 
SEC Proposed Rule: Prohibition on the Use of Brokerage Commissions to Finance Distribution
Document Desc: 
On February 24, 2004, the SEC issued a proposed rule to prohibit mutual funds from paying for the distribution of their shares with brokerage commissions. The proposed rule would end a practice that is fraught with conflicts of interest and may be harmful to funds and fund shareholders.
Document Title: 
SEC Proposed Rule on Disclosure Regarding Investment Advisory Contracts
Document Desc: 
On February 11, 2004, the SEC issued a proposed rule to improve the disclosure provided by mutual funds about how their boards of directors evaluate and approve--and recommend shareholder approval of--investment advisory contracts. The SEC proposal would require a mutual fund to provide disclosure in its reports to shareholders regarding the material factors and the conclusions with respect to those factors that formed the basis for the board’s approval of advisory contracts during the reporting period.
Document Title: 
SEC Proposed Code of Ethics for Investment Advisers
Document Desc: 
On January 20, 2004, the SEC issued a proposed rule to create a code of ethics for registered investment advisers. As proposed, the code of ethics would set forth standards of conduct expected of advisory personnel, safeguard material nonpublic information about client transactions, and address conflicts that arise from personal trading by advisory personnel. Among other things, the rule would require certain employees of an adviser to report their personal securities transactions, including transactions in any mutual fund managed by the adviser.