House Members Urge SEC to Approve Fund Disclosure Rule

The Securities and Exchange Commission should approve a proposal to make mutual fund companies such as Fidelity Investments disclose their votes in corporate proxy contests, two senior Republican House members said Monday.

“Mutual funds belong to the shareholders who fund them, and those shareholders deserve to know how their voting rights are being used,” Rep. Michael G. Oxley (R-Ohio) and Rep. Richard H. Baker (R-La.) said in a letter to the SEC.

Oxley chairs the House Financial Services Committee and Baker the Capital Markets Subcommittee -- the House panels that oversee the SEC.

The rule proposal, opposed by the $6.2-trillion mutual fund industry, has been endorsed by 7,500 individual investors. New York Atty. Gen. Eliot Spitzer voiced support for the plan last week.

The proposal, issued for public comment in September, was pushed by outgoing SEC Chairman Harvey L. Pitt after accounting scandals at Enron Corp. and other companies.

“Making mutual fund voting transparent will strengthen investor confidence by providing another powerful tool to promote corporate accountability and responsibility,” Oxley said.

Mutual funds control about 20% of the publicly traded stock in the U.S., according to industry data. Many proxy contests involve executive compensation, stock options, the election of board members and the level of board independence.

SEC spokesman John Heine declined to comment on the Oxley-Baker letter, which is among several trickling in after the Dec. 6 deadline for comment. The SEC in coming months will decide whether to adopt the proposal or make changes.

The Investment Company Institute, the mutual fund trade group, has said the SEC plan would “politicize” fund managers’ proxy voting decisions. The group’s president, Matthew Fink, sought to clarify the industry’s position Monday.

“The mutual fund industry strongly supports most of the specific new proxy voting responsibilities proposed by the SEC,” he said. Fink said, though, that “requiring mutual funds to report on hundreds of thousands of individual proxy votes twice each year, often with lengthy individual explanations, will undermine rather than enhance the ability of mutual funds” to strengthen corporate accountability.

Many fund companies, including Fidelity and the Vanguard Group, the two largest, have opposed the SEC proposal.

The SEC, under then-Chairman Pitt, initiated another mutual fund disclosure proposal that was issued for public comment last week. This plan, which also is opposed by many fund companies, would make funds disclose their holdings every quarter instead of twice a year.