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Compliance December 17, 2003
SEC Moving Toward Greater Fund Fee Disclosure
December 17, 2003 (PLANSPONSOR.com) - To help mutual
fund shareholders understand how to get "breakpoint"
discounts, federal officials have proposed forcing fund
companies to more clearly explain their fee discounting
policies for those acquiring a large number of
shares.
Reported by Fred Schneyer
>As part of its broad-based fund industry reform effort, the US Securities and Exchange Commission (SEC) unanimously approved the breakpoint clarification proposal as well as a call for public comment on forcing funds to more explicitly state their transaction costs, Reuters reported. The breakpoint proposal will come before the SEC again for a final vote.
“We are moving to improve the transparency of fees for all mutual fund investors,” said Chairman William Donaldson.
The breakpoint disclosure rule was prompted by an SEC investigation this year, which found that almost a third of investors of the thousands of deals studied missed out on discounts they deserved buying large blocks of front-end loaded funds with a purchase fee (See Report: Lost Breakpoint Discount Averaged $364 ). Regulators examined more than 9,000 transactions and found that discounts were called for in 5,515. But they weren’t forthcoming in 1,757 cases. Discounts denied totaled $637,000, the SEC said.
The breakpoints inquiry focused on only 43 of the roughly 2,000 brokerages that sell front-loaded mutual funds.
Breakpoints are money amounts at which fund share purchases get to be big enough to qualify for a fee break. Discounts are commonly offered on a graduated basis to investors making large purchases of front-loaded funds.