Securities Industry Association: SEC Efforts To Strengthen And Expand Disclosure Requirements Constructive Step In Mutual-Fund Reform - Industry To Study Proposed Ban On Certain Directed Brokerage Arrangements

The Securities Industry Association stated that disclosure of relevant information to mutual-fund customers would be enhanced by several of the proposed and final rules announced today by the Securities and Exchange Commission. Adding that the commission's call for a review of rule 12b-1 of The Investment Company Act of 1940 could also produce further benefits to investors and strengthen regulation, SIA said that it looked forward to participating in that process. The association said it also would study the commission's proposed ban on certain directed brokerage arrangements.

"SIA has strongly advocated greater transparency, tough enforcement actions, and reforms to ensure that mutual-fund investors' interests are well protected," said SIA President Marc E. Lackritz. "The SEC took important action today in support of our shared commitment to mutual-fund reform. We look forward to reviewing the commission's proposals and continuing to work with Congress and the SEC to bring about effective regulatory reform."

At today's open meeting, the SEC adopted a rule mandating that certain disclosures be made in shareholder reports using a $1,000 model investment to illustrate yield, costs, and fees associated with a mutual fund, and requiring funds to disclose portfolio holdings four times a year instead of two. "This rule will expand and make more accessible the relevant information available to mutual-fund investors," said Lackritz.

SIA will evaluate the SEC's proposed rule mandating a ban on arrangements that base the directing of commissions on sales of particular fund shares, Lackritz said. The NASD has made a similar proposal, which SIA will review as well.