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Fund Democracy Advocacy Initiatives: Support for Mutual Fund Legislation The current mutual fund scandal has highlighted the need for prompt legislative action. Fund Democracy has proposed, among other things, that Congress create a Mutual Fund Oversight Board. Fair Regulation for Broker-Advisers The SEC staff recently announced that the SEC is likely to adopt a rule soon that would give brokers who provide investment advice a free pass from regulation as investment advisers. With complaints against brokers reaching all-time highs, this is the worst time to subject them to less regulation than other advisers. Let the SEC know you oppose this rule. See SEC Staff Cuts Are Penny-Wise But Pound-Foolish, TheStreet.com (May 8, 2001) A bill to provide professional SEC staff pay parity with banking regulators has been stalled by the House Government Reform Committee. SEC attorneys are paid 24% to 39% less than their banking counterparts, which has resulted in attrition of 30% of the SEC's professional staff over the last two years. The SEC cannot fulfill its mission to protect investors with this level of turnover. Write to Congress to remind it of the importance of SEC oversight to the strength and vitality of our capital markets. Arbitrage Pricing (Apr. 30, 2001) The SEC has finally taken steps to stop arbitrage pricing, a high priority for Fund Democracy's advocacy program. On April 30, 2001, the SEC issued a letter to the mutual fund industry banning the use of stale prices to calculate fund net asset values. The letter will help protect fund shareholders against arbitrageurs who buy fund shares at artificially low prices and sell them the next day when prices are raised to reflect the fund portfolio's true value.
Other materials related to arbitrage pricing:
Pay-to-Play in America (Apr. 26, 2001) See Fund Democracy's Special Report on Pay-to-Play in America, TheStreet.com (Apr. 26-30, 2001) Thoughout America, public pension fund officials accept campaign caontributions from the same money managers chosen by the officials to manage the pensions' assets. The SEC proposed a rule to wipe out pay-to-play practices, only to see it whither under petty, but highly-placed, criticism. Let the SEC and Congress know you support the ban on pay-to-play. Maryland Protection for Self-Dealing Directors Act passed April 10, 2001 On April 10, 2001, Maryland Governor Parris Glendenning sign the Self-Dealing Directors Protection bill. The bill allows fund directors to prevent the fund from suing persons who defraud the fund, even if the directors are involved in the alleged wrongdoing. This bill has been successfully challenged twice before, and the courts will likely reject this bill as well. Multimanager Funds and Your Voting Rights, Hearing Request (Mar. 5, 2001). In 1940, Congress decided that shareholders needed a direct check against mangement abuses. So it required that funds give shareholders the opportunity approve contracts with fund managers. The SEC has since exempted hundreds of funds from this requirement and now proposed a rule that would make the multi-manager exemption available to any fund. Fund Democracy and the Consumer Federation of America have filed a comment letter in opposition to the rule. Related Links:
New Year's Wish List: Mutual Fund Reforms (January 2, 2001). Are you are interested in becoming an activist mutual fund shareholder? Then let the SEC know what needs to be done to ensure that mutual funds are operated in the best interests of their shareholders. Fifteen groups have petitioned the SEC to require that mutual funds (1) publicly report their portfolio holdings on a monthly basis within 60 days after the end of each month, with exceptions granted by the Commission on a case-by-case basis; (2) use names suggesting that they invest in a particular type of security only if 85% of their assets are invested in that type of security; and (3) post portfolio holdings on the Internet in a format that is easy to download and analyze, and provide paper copies of this information upon request.
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Proxy Disclosure, Rulemaking Petitions (December 21, 2000). In their petitions requesting the SEC to require more frequent fund portfolio disclosure, the AFL-CIO and the Teamsters also asked for rules requiring funds to disclose their proxy voting policies and voting records. In doing so, the unions launched an initiative that will likely garner broad support among consumer, employee, investor, and corporate governance groups, and among promoters and practitioners of increasingly popular social investing. Diamonds, SPDRS, WEBS: Request for a Hearing on Exemptive Application (May 4, 2000) Fund Democracy and the Consumer Federation of America successfully petitioned the SEC to stop Barclays Global's rollout of 59 new exchange-traded funds. The petitions were withdrawn when Barclays agreed to provide more information about the risk that the funds would trade at premiums/discounts to their net asset values.
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This page was last updated on Oct. 30, 2001. |