Mutual funds have been the focus of the news over the past couple of days. You can access information about the open meeting of the Securities and Exchange Commission held yesterday here as well as the SEC Chairman William H. Donaldson’s opening statement at the meeting here. The SEC proposed three regulatory initiatives:

• Investment Company Governance. The Commission voted to propose amendments to its rules to enhance fund boards’ independence and effectiveness. The proposal includes requirements for (1) the independent composition of the Board, (2) an independent Chairman of the Board, (3) an annual self-assessment of the Board, (4) separate sessions for the independent Board members (providing Board members with “opportunity for candor”), and (5) the enabling of independent members of the Board to hire their own staff.
• Codes of Ethics for Investment Advisers. The Commission voted to propose new rule 204A 1 and related rule amendments under the Investment Advisers Act of 1940. New rule 204A 1 would require registered investment advisers to adopt and enforce codes of ethics applicable to their supervised persons and would seek to prevent fraud by reinforcing the fiduciary principles that must govern the conduct of advisory firms and their personnel. The code of ethics would have certain minimum provisions governing (1) standards of business conduct that would govern the conduct of an adviser’s supervised persons so that it reflects the adviser’s fiduciary duties, (2) compliance with Federal securities laws, (3) safeguards for nonpublic information, (4) reporting of personal securities holdings and transactions, (5) pre-approval of certain transactions by supervised person, and (6) required reporting of code of ethics violations.

• Confirmation Requirements and Point of Sale Disclosure Requirements for Transactions in Certain Mutual Funds and Other Securities, and Other Confirmation Requirement Amendments, and Amendments to the Registration Form for Mutual Funds. The Commission voted to propose two new rules and rule amendments that require broker-dealers to provide certain information to their customers in connection with transactions in certain types of securities. The two new rules would require broker-dealers to provide their customers with targeted information, at the point of sale and in transaction confirmations. The required information would include costs and conflicts of interest that arise from the distribution of mutual fund shares, unit investment trust (UIT) interests (including insurance company separate accounts that offer variable annuity contracts and variable life insurance policies), and municipal fund securities used for education savings (commonly called 529 plans). The SEC states in its press release that these initiatives are intended to give investors “news they can use.”

Comments on the “Investment Company Governance” and the “Codes of Ethics for Investment Advisers” proposals must be received by the SEC within 45 days of being published in the Federal Register. Comments on the Disclosure requirements must be received within 60 days of being published in the Federal Register. (I discussed where to go to make comments online in this post.) View the press release for further information.

News articles on the proposals:

• The New York Times: S.E.C. Plan Would Force Fund Boards to Change”
• The Associated Press via the Washington Times: “Regulators eye ethics of mutual fund sales”
• CNNMoney.com: “SEC proposes fund ethics requirement: Group votes unanimously to propose new ethics rules for fund advisers and employee disclosure”
• The Wall Street Journal: “SEC Unveils Mutual-Fund Rules.” (No link available.)

Also, the Foundation for Fiduciary Studies has issued the following press releases regarding the proposals:

• Guide to SEC Probe of Mutual Fund and Brokerage Scandals
• Guide to SEC Probe of Consultant Pay-to-Play Schemes
• Guide to SEC Proposal for Required Code of Ethics

Finally, some less current mutual fund articles of interest:

• USAToday.com: “More charges ‘almost inevitable’” (an interview with New York Attorney General Eliot Spitzer)
• The Philadelphia Inquirer: “Funds boards could get teeth to fight fraud”
• The WashingtonPost.com: “State of the Mutual Fund Industry“