Bill to Streamline Fund Regulation Clears Congress

A bill that would streamline mutual fund regulation, sharply cut fees on stock offerings and eliminate overlapping regulation of the stock markets won final passage by the Senate on Tuesday.

By a voice vote, the Senate approved the National Securities Markets Improvement Act of 1996, sending the bill to President Clinton for his signature. The bill, which enjoyed broad bipartisan support and which Clinton is expected to sign, was approved by the House in a voice vote Saturday night.

“This bill cuts through the unnecessary bureaucratic red tape that currently impedes savings and investment and makes it easier for business to grow and investors to save,” Sen. Christopher Dodd (D-Conn.) said in a statement.

The central feature of the bill would be to give the Securities and Exchange Commission sole jurisdiction over registering sales of mutual fund shares and to remove state securities regulators from overseeing such sales. The change is expected to save mutual funds millions of dollars and reduce the costs to them of selling shares.

It’s unclear how much of the savings would be passed on to consumers.

The bill would also give the SEC additional authority to inspect books and records of mutual funds, and it would require funds to disclose more information to investors.

Sponsors called the bill the biggest change in mutual fund regulation since 1940.

Although the bill would eliminate overlapping SEC and state regulation, the extent to which it would preempt state law would not be as great as that proposed in previous versions. States still have the right to oversee stock sales of small companies with assets of less than $10 million.

The bill also seeks to improve regulation of the nation’s 22,500 investment advisory firms and the 150,000 professionals who dispense retirement planning and investment counsel to the public. This business has grown rapidly, but the SEC admits it can inspect the smaller firms only once every 44 years.