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SEC requires more details on fund deals

The SEC Wednesday voted to adopt a new rule requiring that mutual funds disclose more about their policies for giving sales fee discounts to some investors.
/ Source: Reuters

Mutual funds will have to begin disclosing more about their policies for giving some large investors sales fee discounts, the U.S. Securities and Exchange Commission ordered Wednesday.

In a 4-0 vote, the SEC said funds must include more and clearer information in their prospectuses about so-called ”breakpoint” discounts, which have been under scrutiny.

Fifteen brokerage firms recently were disciplined by regulators and agreed to pay $21.5 million in combined fines for not granting breakpoint discounts during 2001 and 2002, said SEC Chairman William Donaldson.

The measure adopted by the commission “will help to ensure that investors understand the breakpoints that are due to them,” he said at a public meeting of the commission.

Breakpoint discounts are awarded to buyers of large blocks of front-end-load fund shares on a graduated basis, depending on the size of the purchase.

The commission was also expected on Wednesday to adopt a new rule requiring mutual fund investment advisory firms to have codes of ethics for their advisers. The rule is one of many responding to a wave of abuses in the fund industry.