Prospectuses Could Include Manager Pay, Holdings

March 11, 2004, 1:00 a.m. EST 1 Min Read

In an open meeting today, the SEC is expected to call for fund manager compensation and holdings to be included in fund prospectus so-called "statements of additional information," The Wall Street Journal reports.

While making fund managers pay known is a familiar refrain of the past number of years, the SEC seems to be taking the proposal very seriously this time, according to the WSJ. Currently, the idea is to disclose the "compensation structure" of a funds portfolio manager and/or the management team. But even if the SEC doesnt follow through on the proposal, the Senates Mutual Fund Reform Act of 2004, a new bill proposed last month, would require the information to be included in filings with the SEC.

The secrecy shrouding fund managers' often complex forms of compensation has for years been a sore point among investor advocates calling for greater transparency in expenses footed by shareholders.

Paul Roye, director of the SECs division of investment management, testified before the Senate Banking Committee yesterday, that along with compensation, the SEC is "considering new proposals to improve disclosure to fund shareholders about their portfolio manager's relationship with the fund." As well, the pending suggestion that fund managers reveal whether they believe enough in their fund to hold shares of it, is one being kicked around at the SEC and in bills on Capitol Hill.

At the SEC, Roye testified, the proposals include measures to clearly disclose direct ownership in funds managed by portfolio strategists and advisory duties in different funds. The proposals also take aim at managers who have launched hedge funds that may invest in the same stocks as regular mutual funds also under their watch.
This additional push for transparency also calls for investment companies to provide additional disclosure on the identities of fund managers rather than hedging this information by naming a lead investment strategist who is supported by an anonymous team.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.