WASHINGTON -- Investors in mutual funds would get detailed information on the managers of fund portfolios under rules proposed by federal regulators yesterday as they target fund industry abuses.
Members of the Securities and Exchange Commission voted 5-0 at a public meeting to propose requirements for fund companies to disclose the identities of members of portfolio management teams as well as their compensation and whether they own shares in the funds they manage.
The SEC commissioners also adopted requirements for the special reports that companies must file with the agency to disclose significant developments. The changes shorten the time period in which the reports must be submitted and add developments that will trigger a report, including a restatement of earnings and the sort of off-the-books transactions that figured in collapsed Enron's accounting scandal. The requirements take effect in August.
The mutual fund disclosure proposal is meant to shed greater light on portfolio managers, their incentives in managing a fund, and their potential conflicts of interest when they manage multiple fund portfolios.
Ordinary fund investors have lost billions of dollars from special trading deals for big-money customers and fund company insiders, regulators say. Some 95 million Americans -- half of all households -- invest about $7.5 trillion in mutual funds, which are the primary vehicle for retirement savings and college funds.
The new information ''may assist fund shareholders in gauging whether the portfolio manager's financial interests are in harmony with their own," SEC chairman William Donaldson said before the vote. He added, however: ''We need to be mindful that, taken too far, this type of disclosure could seriously intrude on the privacy of portfolio managers."
The agency will seek a solution that provides needed information to investors without serious privacy violations before it formally adopts rules following a 60-day period of public comment, Donaldson said.
The SEC is considering alternatives to a proposal designed to curb after-hours trading in fund shares because it could hurt investors in 401(k) and other retirement plans.