SEC Seeks Investor Input on Fund Rule
For the first time, the Securities and Exchange Commission is asking aggrieved individual investors to comment on a proposed rule -- one that would require brokers to disclose fund costs.
The SEC solicited comments on the rule from about 1,300 people whose names were pulled from a database that tracks investor complaints, said Susan Wyderko, head of the SEC’s investor education office.
“We knew they were unhappy,” Wyderko said. “We therefore thought they would be an excellent critical audience to evaluate our proposed disclosure.”
The SEC gave initial approval last month to a plan requiring brokers to detail costs when investors buy a mutual fund. The plan is part of a crackdown on abuses in the $7.4-trillion mutual fund industry, where more than 20 firms, including Putnam Investments and Franklin Resources Inc., are under investigation for improper trading.
The SEC is seeking comment on whether the disclosure forms’ wording is clear and useful, Wyderko said. She said the SEC also planned to have focus groups evaluate the language.
“Most investors are not lawyers,” SEC Commissioner Cynthia Glassman said. “The outreach to the investors is so important because we need to make sure that these disclosures are written in a way that they understand.”
The disclosure proposal, issued for public review in January, would require brokers to reveal if they were paid any incentives and to give an accounting of a fund’s sales charges, annual fees and other costs to customers when they purchase a mutual fund.
The SEC plan also would add information on costs to the confirmation statement that investors get after buying a fund. The disclosure plan could affect 91 million U.S. investors who use mutual funds to save for retirement, homes or other purchases.
The SEC is distributing the proposed disclosure forms to investment clubs, public libraries and other groups whose members may be investors, Wyderko said. The SEC has added a form on its website for comments.
The SEC is asking for comment until April 12. The commissioners will then vote on a final rule for the disclosures.
