Three groups representing consumers are petitioning the SEC to require funds to reveal their holdings on a monthly basis, instead of only twice a year.

Fund Democracy LLP of Chevy Chase, Md. and the Financial Planning Association of Washington, D.C. sent letters petitioning the SEC June 28. The Consumer Federation of America, also of Washington, D.C., plans to send a letter of its own within the next few weeks, said Barbara Roper, director of investor protection at the federation.

Fund Democracy is hoping to enlist the support of some large unions and will press the issue once the number of petitioners grows, said Mercer Bullard, president and founder of Fund Democracy.

Meanwhile, MetaMarkets Investments of San Francisco, which reveals its Open Fund's holdings instantaneously over the Internet, met June 20 with the Investment Company Institute's rules committee to discuss fund transparency.

The ICI said it was satisfied with the status quo of twice-yearly reporting of fund holdings, said Duff Ferguson, a spokesperson for MetaMarkets.

"We were shut down by the industry committee," Ferguson said. Nevertheless, MetaMarkets is still trying to form a coalition to advance disclosure, Ferguson said. Unlike Fund Democracy, MetaMarkets believes more frequent disclosure can be achieved without the SEC's help, he said.

A spokesperson for the SEC said it was too early to determine whether the commission will look into the issue. An ICI spokesperson said the institute's rules committee meeting was closed and he declined to disclose whether the institute would take action to support more frequent disclosure.

If the SEC and the ICI do not pursue the issue, Bullard plans to take his argument to Congress, he said.

"Once we have a number of other, large petitioners, I would ask the SEC to take our proposal seriously," Bullard said. "If the SEC doesn't look into this issue or agree to hold a roundtable by September or October - with members of consumer groups sitting on it, not just industry insiders - we will take our argument to Congress, where, I am sure, they would be most interested in this issue."

"But I would rather not do that because that would make the industry look stupid for not wanting to improve investor education," Bullard said. "Besides, regulators and the industry could do a better job of enforcing fund transparency than lawmakers in Congress."

In his letter, Bullard said that revealing fund holdings only twice a year allows funds to engage in style drift. Funds also frequently add hot stocks just before they have to disclose their holdings, he said.

Style drift and "window dressing" are seriously detrimental to investors who believe they are invested in a specific sector with a specific risk, Bullard said.

The Financial Planning Association also said that revealing a fund's holdings only twice a year makes it very difficult for financial professionals to serve their clients.

"Financial planners and consumers who make their own investment decisions are primarily concerned with improved disclosure to help them identify style drift in a fund's securities," Duane Thompson, director of government relations at the Financial Planning Association, wrote in his letter to the SEC.

"Even the most diligent investors cannot determine what they are buying when they invest in many mutual funds," Bullard wrote. "Large cap funds regularly invest a large percentage of their assets in small cap companies. Substantial positions in foreign stocks frequently find their way into domestic stock funds. And new age tech stocks often dominate blue-chip portfolios."

All three consumer groups propose that every month, fund companies disclose their holdings of two months prior via the Internet. This will be inexpensive, they argue.

They suggest fund companies post two-month-old data because many portfolio managers do not want to reveal current holdings for fear of enabling investors to invest in those securities on their own, outside of the fund.

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