SEC Grants More Leeway to Mutual Fund Ads

The Securities and Exchange Commission has reversed a ruling on mutual fund advertisements, giving money managers more leeway to publish information on their past performance.

In three separate regulatory letters, the SEC said advertisements for one mutual fund could cite the performance of similar funds sponsored by the same company. Until now, mutual fund sponsors could include only past results of the fund featured in the ad.

The new ruling could be a boon for companies that wish to market new mutual funds that lack a track record. Companies such as Fidelity Investments will be able to cite the performance of established Fidelity funds that have objectives and policies similar to those of new funds.

“We have never been able to put the performance of any fund other than the one you are advertising in an ad before,” said Pamela Wilson, a Boston lawyer who specializes in mutual fund law. “This is something of a watershed.”

The new ruling could also help money managers who previously handled pension funds and other institutional accounts break into the mutual fund business. These money managers, for example, could cite their record with institutional accounts in ads for new mutual funds.

The SEC issued its ruling in response to inquiries by ITT Hartford Mutual Funds Inc., Nicholas-Applegate Capital Management and GE Investment Management Inc. Other mutual fund companies will be able to rely on the “no-action” letters that the SEC sent to the three companies.