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Money Management Executive

SEC Will Issue New Disclosure Rule Proposal

March 21, 2001, 1:00 a.m. EST 1 Min Read

The Securities and Exchange Commission is working on a new rule proposal that would increase the level of disclosure in funds’ annual reports, said Paul Roye, director of the SEC’s division of investment management.

The commission plans to issue the proposal for comment by June 30, he said.

The proposal will also attempt to streamline the disclosure of funds’ portfolio holdings as well as increase the frequency of the disclosure from semi-annually to quarterly, Roye said. While there has been a demand for more frequent portfolio disclosure from advisors who use the information when allocating their clients’ assets, most investors do not want more frequent or comprehensive disclosure of portfolio holdings, he said.

Although it would increase the frequency of disclosure, the proposal is likely to require funds’ to list just their top 50 holdings, not the entire portfolio as is currently required, Roye said. Investors that want a complete list of a portfolio's holdings would be able to request it, he said. The proposal will also seek to make index funds exempt from the requirement since their holdings are already known to investors, Roye said.

The proposal is further likely to seek to require funds to use plain English in their discussion of performance, he said. The proposal may also seek new presentation standards for fund fees and expenses based on some of the recommendations the SEC made in its study of mutual fund fees, said Roye. The SEC’s fee study recommended that shareholder reports include the fees and expenses of a $10,000-investment, based on the fund’s historic performance. The study also recommended that shareholder reports include a figure based on a fixed rate of return to facilitate comparisons of expenses among a variety of funds.

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