Regulation

For the second time in a month, regulators have issued a warning to mutual fund companies on their advertising practices.

While ensuring auditor independence may make good business sense in the mutual fund industry, actually achieving it may be very difficult. But, difficult as it may be, it is a problem that mutual fund companies and accounting firms will no doubt have to tackle in the near future.

NASD Regulation has postponed indefinitely the idea of adopting new rules which would have changed the way mutual fund companies pay broker/dealers for sales.

The Investment Company Institute's new voluntary guidelines for mutual fund directors could increase the turnover of fund directors by more than one-third in the next five years, according to an industry consultant.

A system which some industry lawyers say has become an anachronism for large mutual fund complexes - having one board of directors for each mutual fund in a complex - may be headed for extinction.

The courts have dealt another setback to shareholders challenging the independence of mutual fund directors.

NASD Regulation has posted on its web site, www.NASDR.com, responses to frequently asked questions about NASDR's new non-cash compensation rules for the sale of mutual funds and variable annuities. The information, posted in a question-and-answer format, covers 22 areas which have drawn inquiries from NASD members. The new rules took effect Jan. 1 and limit how sales contests can be used to reward intermediaries for mutual fund and variable annuity sales.

EDGAR Online of Norwalk, Conn., in partnership with National Filing Service of New York, began offering a new service June 14 that will enable companies to file their Schedule 13D and 13G documents via the Internet. The SEC requires individuals or companies to file such documents once they acquire more than five percent of a company.

The Investment Company Institute has prevailed in its dispute with the Securities Industry Association over a proposed change in the law which prohibits transactions between a broker/dealer and its affiliated mutual funds.

Some mutual fund companies appear to be unfairly manipulating the investment performance figures they use in their advertisements, according to a top SEC official.