Practice

Washington - Proposed Securities and Exchange Commission rules prohibiting independent auditors from providing other types of consulting services to their audit clients should be adopted, two mutual fund industry executives told the SEC last week.

The National Association of Securities Dealers Regulation posted guidance on its website July 21 about mutual fund and annuity advertising and suitability screening for multi-class mutual funds.

The Investment Company Institute of Washington D.C. has until July 31 to respond to a lawsuit filed by two shareholders alleging the organization is in violation of federal security laws, according to Ronald Rubin who is representing one of the shareholders. The ICI is expected to file a motion seeking a dismissal of the suit, said Rubin.

Fund companies are increasing their efforts to provide advice to 401(k) plan participants in order to develop a relationship that will steer a greater percentage of the assets rolled over from 401(k) plans to them, according to industry analysts.

If legislation introduced in the House of Representatives late last month becomes law, it would make it easier for fund companies to capture a greater percentage of the nearly $300 billion annual rollover of 401(k) assets, according to industry executives and analysts.

The General Accounting Office's report on fund profitability, which draws no conclusion as to whether fund companies have taken advantage of economies of scale to reduce fees but does encourage more disclosure of fees, has elicited a range of responses. It has been dismissed by some industry analysts as a self-serving move by politicians and welcomed by consumer advocates.

The Rupay-Barrington Financial Group of Arlington, Tex. issued a statement July 17 denying knowledge of a lawsuit the SEC filed against the firm accusing it of fraud. The SEC's charges were posted on its website July 12, and accuse the company of making improper loans to its affiliates resulting in inflated net asset values of its three funds. It also charges the companies with illegally suspending investor's redemptions, according to the SEC filing.

The Investment Company Institute has asked the SEC to make changes in its after-tax rule proposal that would reduce the quantity of data funds would be required to disclose and would mean funds have to include the data in prospectuses only, not in annual reports as well.

The Investment Company Institute of Washington, D.C. last week announced its support of legislation that would revamp ERISA regulations to allow 401(k) plan providers to offer employees advice.

The Securities and Exchange Commission is considering allowing fund companies to shorten their bi-annual shareholder reports, according to a spokesperson for the SEC.