The Investment Company Institute proposed a number of measures late yesterday that would require mutual funds to do a better job of disclosing transaction costs.

Boards would be formally required to approve directed brokerage and revenue-sharing agreements, and brokerage commissions would be spelled out in the financial highlights table of annual reports.

The ICI wants funds’ financial arrangements to be disclosed this way, as opposed to a concise billing statement, because the industry has not come to an agreement on a unified format, the ICI said in a statement.

The ICI is also proposing two other measures that would stanch price arbitrage and late trading. The first would be the disclosure of a fund’s gross outflows as a percent of average net assets under management. Better, more prominent, disclosure of a fund’s portfolio turnover rate, in the prospectus, is the second.

These proposals would "greatly enhance disclosure of transaction cost information to . . . investors," ICI President Matthew Fink has told the SEC.

Added ICI Senior Counsel Amy Lancellotta: "These new requirements would both significantly improve investor understanding of a fund’s transaction costs, while simultaneously bolstering investor protection."

Regardless, Lancellotta added, a fund’s total return reflects efficiencies of business. "All fund transaction costs are reflected in a fund’s total return," she said.

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