Compliance

BOSTON - The SEC may ease its original stand on the amount of personal information mutual fund directors must disclose in SEC filings about the business relationships of members of their extended families, according to a high-ranking SEC official.

BOSTON - A U.S. District Court judge has expressed skepticism about a shareholder's claim that Fidelity Investments of Boston had biased its mutual funds' independent directors and charged funds excessive fees.

The Maryland Court of Appeals should uphold the constitutionality of a state law on mutual fund directors, according to mutual fund firms and fund and securities industry trade groups.

Broker/dealers could face pressure to provide investors with an unprecedented amount of detail about the special sales payments they receive from mutual funds and mutual fund companies as the result of a class action lawsuit that is moving slowly through the federal courts.

The SEC has suffered a pair of setbacks in its attempts to discourage intermediaries from recommending that their clients sell funds after holding them for only a short time and then use the proceeds to buy new, hot-performing funds.

The mutual fund industry is rallying to support a Maryland law that says mutual fund directors do not lose their independence because they get paid for serving on several fund boards in the same mutual fund complex.

The SEC last week won a key case in its efforts to discourage registered representatives from selling class B shares of mutual funds when cheaper A shares are available.

The Investment Company Institute has announced its support for an SEC proposal that would allow joint liability insurance coverage to be purchased on behalf of a fund adviser, its officers and its fund directors.

The mutual fund world can expect to hear and read a lot more in the next few weeks about the independence of mutual fund directors, thanks to several events.

Mutual fund investors are better served by following a "buy and hold" investment strategy rather than moving in and out of top performing funds, according to the SEC.

After a string of successes in the courtroom through most of last year, the mutual fund industry suffered a setback recently in a federal class action lawsuit which contends that directors lost their independence by earning high pay for serving on multiple mutual fund boards.

Despite heightened awareness within the fund industry and increased scrutiny by the SEC of fund trustee independence, three newly-registered funds have, in recent months, placed individuals whose independence might be questioned, on their boards.

The Investment Company Institute has recommended the SEC tweak proposed rules which would enable fund companies to send only one copy of a proxy statement to a household whose members own the same fund in more than one account.

A class action suit against Dreyfus Corporation of New York will go forward in U.S. District Court in New York. The court dismissed five of eight claims against Dreyfus on Jan. 5. But, the judge allowed three claims to go forward. The remaining claims allege portfolio manager misconduct.

SEC Chairman Arthur Levitt is scheduled to give the keynote address next month at a special conference for independent mutual fund directors in Washington, D.C.

There is a new headache and expense coming for mutual fund companies this year - privacy compliance.

In light of the Securities and Exchange Commission's report that auditors at PricewaterhouseCoopers of New York compromised their independence with their mutual fund and other securities holdings, the SEC might cite other accounting firms for putting their independence in question, said accounting industry lawyers and executives.

The high cost of retaining key mutual fund executives and concerns about lawsuits have produced what may become a common ingredient in mutual fund company acquisitions -

In calculating fund expense ratios, funds may only reduce total expenses by contractual fee waivers or reimbursements, the SEC is reminding fund advisers in its annual, "Dear CFO" letter.

The SEC has made it easier for funds to redeem the holdings of affiliates and large shareholders in securities rather than cash, a move industry accountants and lawyers say should reduce fund costs and ease operational headaches.