Legislation passed by the House on Wednesday would change how the mutual fund industry operates. The proposal:
Imposes new curbs on fund abuses, notably prohibition of quick in-and-out trading by fund insiders. That practice is under scrutiny in many of the recent cases cited by regulators.
Requires funds to closely monitor enforcement of the 4 p.m. price closing time to ensure that investors receive same day execution of their trading orders and that those in the West will not be disadvantaged.
Requires mutual funds to provide more information to investors on fees and fund operations, including the compensation of portfolio managers. Data to be disclosed also would include a fund's estimated operating expenses in dollars on a hypothetical $1,000 investment as well as fund companies' special deals with brokerage firms to get them to sell particular funds to investors.
Brokerages sell some 80 percent of all mutual fund shares and collect billions of dollars in fees annually for those sales.
Requires that two-thirds of the directors on a fund company board be independent from the companies managing the funds, up from the current required 50 percent.
Requires all funds to have chief compliance officers reporting directly to the independent directors, as well as internal compliance procedures and protections for whistleblowers.
