The SEC has adopted a new rule that will require mutual funds to hold at least 80 percent of their assets in securities that are consistent with their names, said SEC Chairman Arthur Levitt, speaking last week to investors attending an SEC town hall meeting in Philadelphia.
"Now it's your right to have fund names that accurately reflect their holdings, and to receive a prospectus from the mutual fund you are considering buying," Levitt said. "But it's your obligation to review that prospectus before you invest, and to look at the specific types of companies the fund manager is buying."
The new rule is designed to prevent investors from being misled by deceptive fund names, he said.
Currently, only 65 percent of a fund's holdings need to be consistent with the fund's name. The 80 percent rule was initially proposed and put on the SEC's website for comment Feb. 27, 1997.