Compliance

A series of legal challenges to the mutual fund industry's system of independent directors has suffered another setback.

PALM DESERT, Calif. The SEC will scrutinize the business relationships of mutual fund accountants as part of a larger effort intended to strengthen the independence of fund directors.

PALM DESERT, Calif. The SEC is considering proposing that mutual funds be required to disclose more than they currently do about the effect of taxes on investment performance.

The SEC is proposing to shut down transfer agents for mutual funds which have not solved serious year 2000 computer problems by Oct. 15.

Mutual fund companies could be required to disclose the impact of taxes on portfolio returns, if a bill that has been introduced in the U.S. House of Representatives passes. Congressmen Paul Gillmore (R-Ohio) and Edward Markey (D-Mass.) introduced a bill, the Mutual Fund Tax Awareness Act of 1999, on March 11.

SEC Chairman Arthur Levitt is expected to recommend changes in the way mutual funds are governed at an industry conference on mutual fund regulation which begins today.

NEW YORK - The Clinton Administration would welcome testimonials from the mutual fund industry on the capability of the average American investor to make sound investment decisions for his social security funds, with the help of professionals, said Carolyn Weaver, a member of the Clinton Administration Social Security Advisory Board. Weaver spoke on privatization of the Social Security Administration at a symposium sponsored by MFS Investment Management to mark the 75th anniversary of its mutual funds.

Edgar Online now allows individuals to receive e-mail alerts of the Securities and Exchange Commission's Edgar reports through a new service called Edgar Online Personal. Located at www.edgar-online.com/personal, the service costs $9.95 a month, although a free trial is available at www.edgar-online.com/trial.asp?src=eolpt. Users can supply up to ten variables, including ticker symbol, industry group, filing type, filing category and geography to define information most important to them.

WASHINGTON - The corporate structure that the mutual fund industry says is a key to its effectiveness - the system which permits independent mutual fund directors to serve on numerous boards in the same fund complex - appears unlikely to change any time soon.

WASHINGTON - The alphabet soup of fund share classes has become so confusing that the mutual fund industry, the SEC and Congress should examine whether the law that created the system should be changed, according to an industry executive.

The Electronic Compliance Foundation (ECF) is drafting a no-action letter to the Securities and Exchange Commission asking the SEC to permit investors to obtain more investment information on-line.

As Jan. 1, 2000 approaches, financial service company executives are finding that there really are two year 2000 problems.

A lawsuit filed this past July alleging securities fraud against Investment Adviser's, Inc. (IAI) of Minneapolis is continuing to twist its way through the legal system. In the meantime, the fund which is the target of the suit has revealed that approximately 65 percent of its portfolio is illiquid.

A New York federal court judge has dismissed the second of five cases which challenge the independence of mutual fund directors based on their allegedly high pay.

Lawyers have become clear beneficiaries of fights over the performance of closed-end funds and it is the shareholders of closed-end funds who are primarily paying for the lawyers' good fortunes.

A federal court judge has dismissed a lawsuit against T. Rowe Price Associates, giving support to mutual fund industry executives' contentions that fund directors do not lose their independence by serving on more than one mutual fund board.

Worth Bruntjen, a former portfolio manager for the asset management unit of the Piper Jaffray Cos., last week agreed to pay $100,000 to settle SEC charges that he misled investors about his derivative investments from 1992 through at least April, 1994.

The most important issue addressed in this year's SEC letter to CFO's is the requirement that funds include in their reporting of revenue, payments, in cash or kind, they receive from broker/dealers for sending them business. The letter also reminded CFOs of the requirement that funds update their performance bar chart information to reflect the most recent quarterly or year-end performance, said Kenneth Domingues, chief accountant of the SEC's Division of Investment Management.

The SEC has fined three independent fund directors for their alleged conduct in supervising a money market fund whose net asset value (NAV) dropped below $1.00 per share in 1994.

A US Supreme Court action last week is expected to contribute to an increase in the number of patents financial services firms seek.