SEC Asks for Query Into Fund Reports

The Securities and Exchange Commission and members of Congress are asking the mutual fund industry to investigate problems with transmitting mutual fund prices to newspapers.

The industry has responded with two initiatives of its own aimed at improving the process: extending a deadline for funds to report prices and examining other system improvements.

The issue gained attention after Boston-based Fidelity Investments, the nation’s leading mutual fund purveyor, last week admitted that on June 17 it sent out day-old prices for 150 of its 208 mutual funds to the National Assn. of Securities Dealers.

Fidelity said computer problems prevented it from properly calculating prices by the 5:30 p.m. EDT deadline for funds to report their prices to meet newspaper deadlines.

The NASD, an industry self-policing organization, collects the data from funds and distributes it to companies and news organizations.

SEC Chairman Arthur Levitt Jr. asked the industry to provide an “assessment of the nature and extent of existing pricing problems in the mutual fund industry.” On Thursday, Rep. Edward Markey (D-Mass.) asked the SEC to investigate problems of distributing mutual fund prices to newspapers.

The NASD, which had already been upgrading the system, plans a new improvement by July 11: extending the deadline for funds to transmit their closing prices by 10 minutes to 5:40 p.m. EDT.

The fund industry had pushed for extending the deadline so fund data managers would have additional time to check the accuracy of the prices.

“They told us the 10 minutes for them will mean a big difference,” said James Spellman, an NASD spokesman. “It’s a first step toward improving the mutual fund quotation service of the NASD.”

In addition, the NASD is considering computer system improvements to speed the process, Spellman said.

One option is a new electronic link so funds can report prices to the industry group when they’re ready. Under the current system, funds report prices in a single batch to the NASD.

The new transmission system would enable news organizations to provide several versions of mutual fund tables, presumably with the easiest-to-price funds reporting first and the more complex international funds, which take longer to price, reporting later.