Paul Roye, director of the division of investment management at the SEC, gave fund executives a glimmer of hope that the rule might not come into effect at May's meeting of the Investment Company Institute.

"I think it was a brief shining moment of hope when he said that," said Botula.

In his address to the ICI's general membership, Roye brought up two tax bills under consideration at that time by the House of Representatives. Each bill suggested exemptions from mutual fund distributions: $3,000 and $5,000 per individual, respectively.

"If such legislation is adopted, we will certainly study any changes to the way fund distributions are taxed and consider the need to revisit our after-tax rules. If it turns out that the bulk of fund shareholders are able to defer paying taxes on their funds' distributions until they redeem their shares, then we will seriously consider whether there is a need for funds to provide after-tax returns," Roye said.

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