SEC Demurs on More Frequent Disclosure by Mutual Funds Expose Hidden Fund Fees Figuring out what fund fees are costing you is not as easy as those tables in your fund prospectuses make it seem. Help may be on the way. The SEC recently said that its staff will release a fee study any day now that will recommend that funds be required to disclose expenses in dollars, not percentages. This will be a welcome improvement, but the expenses still won't reflect brokerage commissions, and the additional disclosure can't compensate for keeping investors in the dark about the impact of brokerage on fund performance. With a little prodding from activist shareholders, the SEC might be persuaded to make disclosing brokerage commissions a priority for 2001.
Advertisements are supposed to stretch the truth, so the argument goes.
One of the SEC's biggest criticisms of the fund industry has been its emphasis on short-term performance, as exemplified in ads hyping outsized returns in 1999. Yet SEC rules require fund ads to display one-year performance results, even when they don't reflect current conditions. Thus, while fund returns were heading steadily downhill in 2000, many were still touting their spectacular 1999 performance. The SEC needs to reconsider the utility of one-year performance figures. That's not all it needs to think about.