Mutual fund companies increasingly are posting privacy statements on their websites, disclosing to visitors in detail how companies use the information they gather from traffic on their sites.

A random survey of mutual fund companies' websites recently showed that privacy statements have become common, a change from only a year ago, according to consultants. The privacy statements frequently say that companies use data from website visitors to revise and improve the content of websites themselves.

In addition, firms are using data from registered visitors to customize the information which visitors view on the site and receive through electronic correspondence. The online information can help fund companies customize products and services, said Charlene Vedros, assistant director of electronic commerce for American Century Investments of Kansas City, Mo. In addition, website visitors ultimately may provide what amounts to "an online focus group" which provides prompt feedback for fund companies, Vedros said.

What companies do with respect to website privacy and how they disclose it is not just a marketing and distribution issue. The Federal Trade Commission on May 6 sanctioned Liberty Financial Companies of Boston for the manner in which Liberty Financial used a website geared towards children.

Liberty Financial posted a notice on one of its websites,, that information the firm collected at the site would be maintained anonymously. The FTC said the information taken from registered users was kept in a way in which individuals could be identified. Liberty Financial entered into a consent decree with the FTC in which it agreed to provide more detailed disclosure on its website regarding how the firm would use the data it collected.

The firm did not use the material it collected for marketing purposes nor did it provide the information to others, said Hal Thayer, a Liberty Financial spokesperson. However, Liberty Financial did collect data from the website that identified people by name, said Thayer.

"We weren't as sharp about some of the emerging issues as we might have been," Thayer said.

Companies have no legal obligation to disclose their privacy policies on their websites, said Victoria Streitfeld, a spokesperson for the FTC. But, firms which make commitments about how they will maintain data must keep those promises or possibly face regulatory action, Streitfeld said.

Mutual fund companies increasingly are posting privacy statements on their websites, said Steven Miyao, director of mutual fund e-business for McGladrey & Pullen of New York. In McGladrey & Pullen's 1998 survey of mutual fund company websites, only a handful of the 320 sites surveyed had privacy statements, said Miyao.

The firm is conducting its 1999 survey now. Although survey data is incomplete, Miyao said privacy statements have become far more common than last year. There is an "obvious trend" toward having the statements, Miyao said.

Fund companies are frequently disclosing that they use information from the visitors to improve the sites themselves and, in some instances, for internal marketing, Miyao said.

McGladrey & Pullen has yet to find a firm which sells the Website-derived information to others, Miyao said. McGladrey & Pullen expects to publish its 1999 website survey in the fall.

Fidelity Investments of Boston is one firm which does not include a privacy statement on its website, said Johanna Thornblad, a Fidelity spokesperson. Fidelity is currently reviewing the issue of investor privacy, she said.

For competitive reasons, Fidelity does not discuss how it tracks information obtained from visitors to its website, she said.

Fund consultants say that website traffic can provide data about demand for a company's products and services. That information ultimately can help increase sales and reduce marketing expenses, fund executives and consultants say. Website sponsors "are all interested in capturing the kind of data that will help them further segment their customer base," said John Payne, a consultant at Cerulli Associates, a fund consulting firm in Boston. "They're all trying to capture (web) surfing history."

Fund companies are disclosing their efforts in various ways. The Vanguard Group of Malvern, Pa., for example, posted on its website on May 12 a detailed explanation of how it uses technology to record information about registered users to its website to customize some information. Vanguard said it does not use the technology to collect demographic information or for marketing purposes.

American Century, Charles Schwab & Co. of San Francisco and MFS Investment Management of Boston all post on their websites statements that they collect no personal information about unregistered visitors. American Century and Schwab say they will use information from registered users to customize services for investors.

MFS, a wholesale mutual fund firm, uses the information only for generic purposes and will only use specific information about an individual for the purposes designated by the individual. SunAmerica, the mutual fund and annuity firm in Los Angeles, reserves the right to treat suggestions and comments as non-confidential and to develop new products based on those comments, according to the firm's statement.

The trend towards including privacy statements on websites appears to be driven by media scrutiny of the issue, said Miyao.

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