Regulation

A recent federal court ruling gives plaintiffs' attorneys additional encouragement to bring suits against mutual fund companies.

Lawyers are scheduled to appear in a Boston court Friday to argue over whether James D. McCall, a portfolio manager at Pilgrim Baxter & Associates, should be allowed to leave the firm and join Merrill Lynch & Co.

The SEC last week fined Datek Online Brokerage Services Corp. of Iselin, N.J. $50,000 for failing to segregate customer funds and for books and records violations. Datek's former chief financial officer, Moishe Zelcer, was fined $10,000 in the case, which was filed May 18. Datek and Zelcer agreed to the fine and other sanctions without admitting or denying the SEC's allegations. The SEC said that on 12 occasions this spring, Datek used customer funds to meet the firm's obligations.

Mutual fund companies have until December 1999 to create simplified prospectuses so they and the SEC's Division of Investment Management have their hands full with that task until at least then.

The Vanguard Group of Valley Forge, Pa., has posted its Y2K preparation filing with the SEC in a section of its website, www.vanguard.com, devoted to the Year 2000.

The SEC wants to divide responsibility between mutual fund boards and custodians for oversight of the foreign companies which keep possession and records of the foreign stocks and bonds mutual funds own.

The SEC last week brought its first action against a mutual fund adviser regarding preparedness for computer problems arising from the turn of the century.

BOSTON - A federal court judge here appears likely to substantially reduce and perhaps dismiss a lawsuit which challenges the independence of Fidelity Investments' mutual fund directors.

NEW YORK - The Securities and Exchange Commission is considering several amendments to the Investment Company Act to strengthen the role of independent directors of mutual fund companies, Paul Roye, the SEC's director of investment management, said last week. Roye spoke at a conference hosted by The Practising Law Institute of New York.

The mutual fund and securities industries are urging the SEC to delay and substantially revise proposed new rules which would set quality standards for transfer agents and broker/dealers.