Amended bill targets pre-sale disclosure rules

The Securities and Exchange Commission would be instructed to study whether pre-sale disclosures should be required for all products sold to retail investors under a provision of financial services regulatory-reform legislation likely to be approved this week by the House Financial Services Committee.

An amendment offered by Rep. Ed Perlmutter, D-Texas, would require the SEC to study the issue before issuing rules requiring pre-sale disclosures to be made for mutual fund sales.

An earlier version of the bill raised the ire of the fund industry and consumer advocates last week by limiting the pre-sale disclosures to just mutual funds.

“There’s not a reason in the world why you ought to single out mutual funds,” said.

Barbara Roper, director of investor protection for the Consumer Federation. “If pre-sale disclosure is a good idea, it’s a good idea for all the products and services that brokers recommend.”

Ms. Roper said that saddling mutual funds, and not other financial products, with pre-sale disclosures could lead brokers to sell less suitable products.

Needles to say, Ms. Roper was pleased with the amendment.

“We support the intent of the amendment to ensure that comparable products are treated alike and that investors receive pre-sale disclosures for the broadest array possible of products and services,” she wrote in an e-mail.

The mutual fund industry also cheered the amendment.

“The amendment will help ensure that any new regulations treat all individual investors equally, providing the same level of disclosure regardless of which SEC–regulated product or service they buy,” said Mike McNamee, spokesman for the Investment Company Institute.

E-mail Sara Hansard at [email protected].

Related Topics: Investment Company Institute (ICI)