Insights February 2002

The February 2002 issue of Fund Democracy Insights considers the assumed equivalence of sell- and buy-side analysts' conflicts of interest under NASD and Congressional proposals to enhance analyst disclosure requirements, the potential effect of the Enron debacle on mutual fund regulation, and the effect of the expansion of the definition of "interested person" by the Gramm-Leach-Bliley Act on independent fund directors.

Table of Contents

February 2002

Buy- and Sell-Side Analysts' Conflicts. . . . . . . . . . . . 1

Enron and Mutual Fund Regulation. . . . . . . . . . . . . . 5

Bank-Affiliated Fund Directors Beware. . . . . . . . . . . 8

Worth Reading on the Internet . . . . . . .. . . . . . . . . . . 12

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Links to resource materials (.pdf files require Adobe Acrobat for viewing):

Buy- and Sell-Side Analysts' Conflicts

Senator Michael Oxley, Press Release (Feb. 7, 2002) (announcing NASD and NYSE proposals regarding analyst disclosure)
NASD Press Release (Feb. 7, 2002) (announcing new disclosure rules applicable to securities analysts)
NYSE Board Approves Sweeping Changes in Rules Regarding Research Analysts (Feb. 7, 2002) (click through to press release) (see also link to audio of press briefing)
Required Disclosures for Securities Recommendations, NASD Notice to Members 01-45 (July 2001)
Independent Investment Advisers Act of 2002, S. 1895, 2d Sess. 107th Cong. (Jan. 24, 2002) (introduced by Senator Fitzgerald)
Peter Elkind, Where Mary Meeker Went Wrong, Fortune (May 14, 2001) (discussing how Mary Meeker came to see herself not as an analyst, but as a dealmaker)
Q&A with Mary Meeker: "We had a Heck of a Feast" Business Week Online (Apr. 30, 2001)
Peter Elstrom, The Great Internet Money Game, Business Week (Apr. 16, 2001)
Letter from Amy B.R. Lancellotta, Senior Counsel, Investment Company Institute to Barbara Z. Sweeney, NASD Regulation, Inc. (Aug. 15, 2001) (commenting on proposed amendments to NASD rule 2210(d)(2)(B))
Fund Democracy, Memorandum in Support of Rulemaking Petition (June 28, 2000) (discussing at pages 5 to 7 Fidelity managers' touting of stocks while their funds were reducing their positions)

Enron and Mutual Fund Regulation

In the Matter of Enron Corporation, Notice of Exemptive Application, Investment Company Act Release No. 10150 (Feb. 14, 1997)
Letter from Congressman John D. Dingell, to SEC Chairman Harvey L. Pitt (Jan. 30, 2002)(criticizing Enron exemption from investment company regulation and provision of bill that would exempt certain affiliates of public utility holding companies from investment company regulation)
Stephen Labaton, Exemption Won in '97 Set Stage for Enron Woes, New York Times (Jan. 23, 2002) (describing Enron exemption from investment company regulation)
Electric Supply and Transmission Act, H.R. 3406,1st Sess., 107th Cong. (Dec. 5, 2001) (introduced by Joe Barton R-TX) (including section 125 which grandfathers certain affiliates of public utility holding companies from investment company regulation)
Idealab!-Related Material

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Bank-Affiliated Independent Fund Directors Beware

Gramm-Leach-Bliley Act Section 213
Financial Services Legislation Signed, Investment Company Institute (Nov. 19, 1999) (comments on main provisions of Gramm-Leach-Bliley Act)
Executive Summary, Report of the Investigation by the Special Investigative Committee of the Board of Directors of Enron Corporation (Feb. 1, 2002) (see also link to entire report)

Worth Reading on the Internet

SEC Chairman, Harvey L. Pitt, Testimony before the Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises, U.S. House of Representatives (Feb. 4, 2002)
President Bush Calls for Action to Protect Workers' Retirement (Feb. 1, 2002) (describing proposed reforms to the regulation of 401(k) plans)
Chris J. Brown, Direct to the Intermediary, Financial Research Corporation (undated) (discussing trends in intermediary sales of mutual fund shares)
Reisman v. Van Wagoner Funds, Inc. Complaint, Civ. 02-012 (Jan. 4, 2002) (complaint alleging mispricing of funds' portfolio securities)
Brief of the Securities and Exchange Commission, Amicus Curiae, Sidney Olmsted v. Pruco Life Insurance Company of New Jersey (Dec. 5, 2001) (discussion of private rights of action under sections 26 and 27 of the Investment Company Act)
Commission Statement about Management's Discussion and Analysis of Financial Condition and Results of Operations, Securities Act Release No. 8056 (Jan. 22, 2002)

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