The full House will gets it chance to vote thumbs up or down on the Mutual Fund Integrity and Fee Transparency Act
(HR 2420) in the near future as the legislation quickly passed through the House Financial Services Committee Wednesday night. The bill passed the committee on a voice vote.
However, the bill that passed through committee had already been stripped of many disclosure provisions. Baker agreed to the changes in the bill after he ran into opposition from both Democrats and Republicans on the committee. With the changes, it is likely that the bill will have an easier time making it out of the House. However, there is still no Senate version of the bill. Unless the bill finds a strong sponsor in the Senate it is unlikely to make it to President Bush's desk.
Baker's biggest compromise was on how and when fund firms must disclose costs. Rather than mandate disclosure of trading costs the bill calls for more study by the SEC in on ways that fund firms could better disclose the information. The SEC is also instructed to study ways for fund firms to disclose soft-dollar costs and revenue sharing.
It also only requires that funds express shareholder costs as a dollar amount per $1,000 invested in the fund. The initial draft of the bill called for fund firms to calculate a personal expense amount for each investor.
The most current version of the bill would make fund firms disclose whether disclose incentives they provide to brokers selling the fund to shareholders.
Finally, the bill gives the SEC nine months to clarify the definition of what funds may cal themselves "no load" vehicles in their marketing efforts and it puts the SEC rules regarding the disclosure of proxy votes into law.
Remaining in the bill are provisions that require funds companies to disclose the compensation of portfolio managers and that outside directors hold at least two-thirds of boards up from two-fifths currently. However, the requirement that boards be chaired by an independent director was dropped in committee after Republicans objected to it.
Also not making it into the final bill was an amendment penned by Connecticut Republican Christopher Shays that would have banned government bond funds from investing heavily in agency-backed securities. The Shays amendment was defeated in a voice vote.
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