FIGHT OVER WHETHER TO FLAG MAJOR EVENTS TO INVESTORS: SEC PROPOSES, FUNDS OPPOSE

A Securities and Exchange Commission plan to require mutual funds to notify it of “significant events” is likely to be as well received by the fund industry as Paula Jones would be at a White House dinner party.

The draft regulation would require funds to file reports of such major events as changes in portfolio managers, resignations of directors, and unusual levels of sales or redemption activity (InvestmentNews, March 30).

A similar rule is in force for publicly traded corporations, which file a Form 8-K to report significant events.

The proposal is “something we’d like to move forward on,” said Barry Barbash, director of the SEC’s division of investment management, at a recent industry conference in Orlando, Fla. “We think it may be viewed that there’s something of a gap in investment company reporting and this would fill some of that gap.”

interim info

Mr. Barbash said mandatory disclosure of such events, which has been under consideration for at least a year, would aid investors by encouraging funds to release interim information in a uniform and consistent manner.

Not surprisingly, fund groups aren’t happy. Thomas P. Lemke, general counsel and chief operating officer of Milwaukee-based-Strong Capital Management Inc., believes the proposed requirement is unnecessary.

“This seems to have sprung up out of the ground,” Mr. Lemke says. “We’ve lived for 50-some years without this form of reporting and I don’t know of any lawsuits or cases where people are saying, ‘I didn’t get interim information.’ ”

Pamela Wilson, a mutual fund lawyer at Boston law firm Hale & Dorr, agrees.

“I know my income will go up because of it. . . Most fund groups view it as yet another report they’ll have to file.”

who didn’t file form adv-t?

In another development, the SEC also intends to drop 5,092 investment advisers from its registration rolls after April 30. That’s because the advisers failed to file Form ADV-T, the one-time document required under a 1996 law giving the agency authority over advisers supervising at least $25 million in assets. The rest are subject to state regulation.

Many of the soon-to-be unregistered firms are no longer in business or run less than $25 million.