Mutual Fund Industry Panel Proposes Some Self-Policing : Ethics: The advisory group’s guidelines would place sharp limits on personal investing by managers.

A mutual fund industry organization proposed Monday to sharply limit personal investing by fund managers, a plan prompted by recent complaints that some managers may have feathered their own nests in conflict with the best interests of their funds.

But the six-member advisory group of the Washington-based Investment Company Institute stopped short of calling for a total ban on personal investing by fund managers, which a number of the industry’s critics have advocated.

The industry is facing pressure to act from Congress and the Securities and Exchange Commission following several recently reported episodes of fund managers’ personal trades in securities of companies in which their funds were about to invest.

But the panel said it concluded that the problems are isolated and that the mutual fund industry’s ethical track record is superior to that of bank trust departments, pension funds and other managers of pooled investments.

The proposed guidelines would bar managers from investing in initial public offerings and from profiting on short-term trades. They would also prohibit fund employees from trading in a stock while any of the funds in their group had a pending order to buy or sell the same stock.

Rep. Edward J. Markey (D-Mass.), chairman of the House Subcommittee on Telecommunications and Finance, praised the industry proposal. Barry Barbash, director of the SEC’s division of investment management, said the commission expects to issue a report within a month of its own inquiry into the recent incidents.

Barbash said a survey of trading records from 30 mutual fund groups does not appear to show a widespread problem, although data is being tabulated. While the SEC will not take a position on the industry guidelines until its own inquiry is complete, Barbash said the proposal shows that the industry is “reacting responsibly to the issues we raised.”

Ronald P. Lynch, chairman of the ICI and its advisory group and managing partner of Lord Abbett & Co., said the recommended guidelines would wipe out any potential conflicts of interest.

The guidelines must still be approved by the institute’s board of governors and even then would not be binding. But the great majority of mutual fund companies are expected to adopt the guidelines, said James S. Riepe, another member of the advisory group, who is also managing director at funds group T. Rowe Price Associates.

Jane Jamison, a spokeswoman for Fidelity Investments, the nation’s largest mutual fund concern, said Fidelity will adopt the guidelines, although its existing rules already incorporate some of the proposals. The SEC reportedly is looking into personal trading by a few Fidelity employees.

In addition to barring managers from putting their personal money into initial public offerings, the guidelines call for:

* Requiring managers and certain other fund employees to “pre-clear” personal investments with their companies’ compliance officials. They would also be required to get specific authorization in advance from their companies before investing in private placements--stock and other securities that are not offered to the general public or registered with the SEC.

* Forbidding managers to keep any profits that result from selling a security within 60 days of its purchase.

* Barring portfolio managers from buying or selling a security within seven calendar days before or after the manager’s fund trades the security. A broader group of fund employees would be prohibited from buying or selling on the same day any fund managed by their company trades a security.