Urges SEC to Reject Calls for More Frequent Portfolio Disclosure

In an effort to head off a possible rulemaking initiative, the Investment Company Institute today issued a letter to the Securities and Exchange Commission urging it to reject calls for more frequent disclosure of funds' portfolio holdings and to scale back existing disclosure requirements.

'The letter provides the SEC with evidence that increasing the frequency of portfolio holdings disclosure would harm, not help, fund shareholders,' said Craig Tyle, general counsel of the ICI, in a conference call to members of the media. 'Because of the serious potential for harm to fund shareholders, we're hopeful that the SEC staff will agree that it would be a bad idea for the Commission to mandate more frequent portfolio holdings disclosure by all mutual funds.'

Moreover, Tyle called on the SEC to scale back existing disclosure regulations that require fund complexes to disclose their aggregate holdings on a quarterly basis. 'There are companies advertising on the internet today, services that they claim will allow their customers to benefit by tracking how mutual funds and other large institutions trade,' he said. 'Because these abusive practices are already occurring, the SEC should reassess a different disclosure requirement under the securities laws. … We think the SEC should consider reducing the frequency of these disclosures in order to protect fund shareholders.'

The ICI's letter is in reaction to recent indications that the SEC is considering a rulemaking initiative aimed at increasing portfolio disclosure, the letter said. In fact, SEC staff members have said the commission is weighing a rule proposal that would give shareholders more frequent disclosure of funds' portfolio holdings. One option that has been discussed would provide a partial listing of funds' holdings in quarterly reports and give shareholders the option to request a full listing of the holdings on a quarterly basis.

But there is no demand on the part of shareholders for more frequent portfolio disclosure, according to Tyle. 'Our members report no demand from their shareholders for this information,' he said. 'And for those investors to whom it is important, there are plenty of funds out there that voluntarily disclose their portfolios more than twice a year.'

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