Monkey Throwing Darts

SEC Proposes Mutual Fund Ad Rules

Monkey Throwing Darts

The Securities & Exchange Commission (SEC) is seeking comment on proposed rules designed to ensure mutual fund advertisements aren't misleading to investors. The Commission specifically cited fund ads that touted skyrocketing performance in 1999 and 2000 as examples of marketing efforts that may have established unrealistic investor expectations.

The SEC wants all fund ads to be accompanied by a disclosure that past performance isn't necessarily indicative of future results. In a move likely to be applauded by many fund investor advocates, the SEC is proposing that ads reveal fund's charges (such as loads) and expenses. The Commission is also calling for prominent disclosure of dates quoted in performance ads.

Comments on the proposed rule amendments are due by July 31, 2002. For more information on the proposed rules and how to submit comments, visit www.sec.gov.

Let's get together . . .

Index providers FTSE and Russell announced Russell indexes will now use FTSE's Global Classification system to establish sector data. The partnership allows investors to make apples-to-apples sector comparisons across the globe using Russell's domestic U.S. indexes and FTSE's international benchmarks.

"By working with FTSE to align our classification methodologies, we provide the global investment community with a common standard to measure their U.S. allocation," said Lori Lori Richards, manager of Russell indexes.

"Investors who use Russell as their U.S. benchmark can now compare these holdings with their international portfolios," added Jane Staunton, president at FTSE Americas.

In 2001, index providers S&P and MSCI collaborated on a common Global Industry Classification Standard designed to facilitate consistent industry comparisons between the two index families.

The 10 FTSE economic classifications now offered to Russell index clients are: resources, basic industries, general industries, cyclical consumer goods, non-cyclical consumer goods, cyclical services, non-cyclical services, utilities, financials and information technology.

More information on the FTSE Global Classification Standard can be found here.

Stat of the day . . .

Despite the rise in popularity of low-cost index funds in the 1990s, the average expense ratio for domestic equity funds continues to rise.

Year
Average expense ratio
# of domestic equity funds
1992
1.31%
980
1993
1.29%
1,301
1994
1.35%
1,686
1995
1.39%
2,114
1996
1.39%
2,627
1997
1.39%
3,335
1998
1.42%
4,181
1999
1.43%
4,886
2000
1.44%
5,341
2001
1.47%
4,739

Source: Morningstar