Compliance

A couple of new mutual fund companies have done what could be a risky maneuver - launching a website that mentions a fund before the fund has been approved by the SEC.

The SEC has finalized amendments to a rule which governs the appointment of an interim investment adviser to a mutual fund. The rule clarifies the procedure to be followed when there is a merger of a fund's investment adviser. The revised rule 15a-4, originally adopted in 1980, permits a fund to be advised under a short-term contract until shareholders can vote on a new contract.

Mutual fund shareholders next year could begin seeing the expenses associated with running their funds decrease by millions of dollars as the result of recent moves by the Securities and Exchange Commission.

Two top executives at Sunpoint Securities, a broker/dealer of Longview, Texas, allegedly diverted up to $25 million from as many as 9,000 clients during a nearly two-year period, the SEC alleged in a lawsuit filed Nov. 19.

The SEC, alleging a portfolio manager stole approximately $5.8. million from the funds he managed, has sued the manager who has already spent seven months in jail on related charges.

Bexil Corp. of New York, the fixed-income closed-end fund, is asking shareholders to allow the fund to make a change in its investment style. The fund wants to change its investment objective so that it can invest as much as 50 percent of its assets in the equities of growth companies, according to a proxy statement the fund filed with the SEC Nov. 15. The fund currently must invest at least 65 percent of its assets in U.S. government securities.

An unusual fight pitting two groups of fund directors against each other is providing the SEC with its first public test of the agency's campaign to strengthen the role of independent fund directors.

Legislation aimed at establishing uniform federal law for electronic commerce and electronic signatures and addressing some concerns of the mutual fund industry, has advanced in Congress.

Olin is campaigning for a proxy vote that would fire Alliance Capital Management of New York as advisor to the Austria Fund, according to an SEC filing.

The Saudi Arabian government's recent decision to allow foreigners to invest in the Saudi stock market through mutual funds probably will not have a lot of U.S. fund companies jumping at the chance to do business there, some industry analysts said.

The fact that retail funds may be sold in variable annuity sub-accounts in the form of funds of funds, has prompted some insurers to seek to include retail funds in other annuities.

CHICAGO - The annuity industry is expecting to receive a formal statement soon from the Internal Revenue Service as to whether partial 1035 exchanges are allowable.

Broker/dealers will be able to have their representatives collect asset-based fees rather than commissions without facing added regulation under a rule proposed by the SEC. If adopted, the new rule will allow registered reps to offer wrap accounts and some other products for which they receive a fee based on assets under management, without being subject to the Investment Advisers Act, the SEC said in a statement.

BOSTON - The SEC's fact-finding examinations of the securities execution practices of mutual funds are unlikely to result in a public report, said Edward A. Ryan, Jr., assistant district administrator for regulation in the SEC's Boston office. It is unclear how the SEC will use the data gathered from the exams, he said. The SEC could issue a statement discussing execution practices or it could propose a rule, he said.

A NASD Regulation proposal to prohibit broker/dealers from paying their registered representatives more for selling the broker/dealer's own mutual funds than for selling outside funds has run into opposition from trade groups representing the securities and mutual fund industries.

If the Financial Services Modernization Act of 1999 is enacted, mutual fund companies will buy insurance and banking companies while at the same time becoming acquisition targets of those same firms, industry consultants say. The bill would spur a race to offer clients a wide array of investment products, they say.

A handful of mutual funds that invest in the securities of Taiwanese companies were slow to respond after an earthquake forced the closing of the Taiwan stock market for a week, said Paul Roye, director of the SEC's division of investment management.

WASHINGTON - The SEC will continue to pay attention to mutual fund advertising, but it is potential scrutiny of fund ads by plaintiffs' lawyers that is giving some industry participants pause.

WASHINGTON - If the test for success for new regulations is that they contain a little something to annoy just about everyone, the SEC staff has hit a home run with the rules it has proposed for mutual fund directors.

It was not a resounding victory for those who want to job hop, but top executives who formerly worked at State Street Global Advisors of Boston have been allowed to join a competitor despite a non-compete agreement SSgA contends prohibited the move.