SEC Adopts Rule to Require Side-by-Side Management Disclosure
In an open meeting on Wednesday, August 18, the Securities and Exchange Commission voted unanimously to approve rule amendments that are designed to improve the disclosure provided by funds regarding their portfolio managers. The new rule amendments now require disclosure if mutual fund managers simultaneously manage other funds such as hedge funds. In May of 2004, The Asset Managers Forum COO Group filed a comment letter with the SEC that supports the Commission's disclosure approach to the question of side-by-side management of hedge funds and mutual funds by portfolio managers. The letter cites that a disclosure approach is more favorable than prohibiting the practice since a ban would likely be detrimental to both investors and small asset management firms.
In addition to side-by-side management disclosure, the rule also requires a fund to disclose information such as the compensation structure of fund managers, the ownership of securities in the fund and other types of information relating to the members of the fund management team. In its comment letter, the AMF cautioned the Commission of possible unintended consequences of excessive disclosure of information such as compensation structure and the identity of the entire fund management team, which could be inefficient and drive up management costs. The Commission, aware of these concerns, has taken measures to ensure that privacy is upheld. For example, the new rules will require only that fund managers disclose the range of their securities holdings. The AMF will continue to monitor this issue and will continue to update its members on related regulatory developments.
Click here to read the AMF COO Comment Letter
Click here to read Chairman Donaldson's opening statement on portfolio manager disclosure
SEC Adopts Rule that Prohibits the use of Brokerage Commissions to Finance Distribution
In another unanimous vote on August 18, the SEC is now prohibiting the practice of directed brokerage, which permitted mutual fund firms to use fund brokerage as a method of compensating broker-dealers for selling fund shares. In approving the proposed rule, Chairman Donaldson stated that the Commission was banning the practice because of possible opportunities for abuse. According to his statement, "funds will still be able to use selling brokers to execute portfolio transactions", but, "the fund must have policies and procedures in place to preclude 'quid pro quo' arrangements relative to the sale of fund shares". Accordingly, the Commission adopted amendments to Rule 12b-1 to prohibit directed brokerage.
Click here to read Chairman Donaldson's opening statement on amendments to Rule 12b-1
AMF Leaders to Speak at Institutional Investor Event
Institutional Investor is hosting an event on Technology and Operations for Asset Management Firms on September 30, 2004 in New York City. This event is geared toward Front-to-Back Office strategies for supporting the evolving needs of complex investment portfolios.
AMF Steering Committee members Stephen Mellas (Chairman) of Goldman Sachs Asset Management, Julie Warren of New York Life Investment Management, Lisa Illaria of Prudential Investment Management and Michael Wyne of Fischer Francis Trees & Watts will be among the featured speakers. In addition, AMF COO Group member John Gidman will also be among the panel speakers.
Institutional Investor is offering a 15% discount for AMF members. For more information, contact Shona Thomson at 212.224.3440.
Click here to register through the AMF COO Web Page