U.K. Regulators Debate U.S. Disclosure Rule

Many U.S. mutual fund managers are already bristling over the new Securities and Exchange Commission rule that demands that they disclose whether they invest in the funds they manage, so it's probably safe to assume that they're none too pleased that their European peers aren't subject to the same scrutiny.

That could soon change, however.

This year, in an effort to put an end to scandals, U.S.-based mutual funds are obligated to reveal in a Statement of Additional Information how much their top managers have invested in their funds. The rule was met with criticism but support form key groups like the Washington-based Investment Company Institute helped validate its worth.

According to the Committee of European Securities Regulators based in Paris, the investment managers they monitor are not required to disclose the personal stakes of their portfolios. Perhaps for good reason, too, because Europe has not experienced the kind of scandal that swept through the U.S. fund industry. But it's also because they don't see any meaningful value in it, said regulator David Cliffe of the Financial Services Authority.

Heide Stam, general counsel for The Vanguard Group here in the U.S. would agree.

"Disclosure of a managers' investments gives undue significance to a figure whose value is relative to managers' own personal financial characteristics," Stam told The Financial Times.

On the other hand, Morningstar is very much behind such policy: "CEO's are required to declare their own stakes, why shouldn't fund managers, " said Patrick Dorsey, director of stock analysis at Morningstar.

The controversial rule has become topical again because tax authorities in the United Kingdom are debating whether it might keep small groups of investors from setting up funds just to reduce their taxes.

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.