IIB 
108TH CONGRESS 
1ST SESSION H. R. 2420
IN THE SENATE OF THE UNITED STATES 
NOVEMBER 20, 2003
Received; read twice and referred to the Committee on Banking, Housing, and 
Urban Affairs 
AN ACT 
To improve transparency relating to the fees and costs that 
mutual fund investors incur and to improve corporate 
governance of mutual funds.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
HR 2420 RFS 
SECTION 1. SHORT TITLE. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Mutual Funds Integrity and Fee Transparency Act of 
2003’’. 
(b) TABLE OF CONTENTS.—
Sec. 1. Short title. 
TITLE I—INTEGRITY AND FEE TRANSPARENCY 
Sec. 101. Improved transparency of mutual fund costs. 
Sec. 102. Obligations regarding certain distribution and soft dollar arrange-
ments. 
Sec. 103. Mutual fund governance. 
Sec. 104. Audit committee requirements for investment companies. 
Sec. 105. Trading restrictions. 
Sec. 106. Definition of no-load mutual fund. 
Sec. 107. Informing directors of significant deficiencies. 
Sec. 108. Exemption from in person meeting requirements. 
Sec. 109. Proxy voting disclosure. 
Sec. 110. Incentive compensation and mutual fund sales. 
Sec. 111. Commission study and report regulating soft dollar arrangements. 
Sec. 112. Study of arbitration claims. 
TITLE II—PREVENTION OF ABUSIVE MUTUAL FUND PRACTICES 
Sec. 201. Prevention of fraud; internal compliance and control procedures. 
Sec. 202. Ban on joint management of mutual funds and hedge funds. 
Sec. 203. Short term trading by interested persons prohibited. 
Sec. 204. Elimination of stale prices. 
Sec. 205. Prevention of unfair after-hours trading. 
Sec. 206. Report on adequacy of remedial actions.
TITLE I—INTEGRITY AND FEE 
TRANSPARENCY 
SEC. 101. IMPROVED TRANSPARENCY OF MUTUAL FUND 
COSTS. 
(a) REGULATION REVISION REQUIRED.—Within 270 
days after the date of enactment of this Act, the Securities 
and Exchange Commission shall revise regulations under 
the Securities Act of 1933, the Securities Exchange Act 
of 1934, or the Investment Company Act of 1940, or any
HR 2420 RFS 
combination thereof, to require, consistent with the protec-
tion of investors and the public interest, improved disclo-
sure with respect to an open-end management investment 
company, in the quarterly statement or other periodic re-
port to shareholders or other appropriate disclosure docu-
ment, of the following: 
(1) The estimated amount, in dollars for each 
$1,000 of investment in the company, of the oper-
ating expenses of the company that are borne by 
shareholders. 
(2) The structure of, or method used to deter-
mine, the compensation of individuals employed by 
the investment adviser of the company to manage 
the portfolio of the company, and the ownership in-
terest of such individuals in the securities of the 
company. 
(3) The portfolio turnover rate of the company, 
set forth in a manner that facilitates comparison 
among investment companies, and a description of 
the implications of a high turnover rate for portfolio 
transaction costs and performance. 
(4) Information concerning the company’s poli-
cies and practices with respect to the payment of 
commissions for effecting securities transactions to a 
member of an exchange, broker, or dealer who—
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(A) furnishes advice, either directly or 
through publications or writings, as to the value 
of securities, the advisability of investing in, 
purchasing, or selling securities, and the avail-
ability of securities or purchasers or sellers of 
securities; 
(B) furnishes analyses and reports con-
cerning issuers, industries, securities, economic 
factors and trends, portfolio strategy, and the 
performance of accounts; or 
(C) facilitates the sale and distribution of 
the company’s shares. 
(5) Information concerning payments by any 
person other than the company that are intended to 
facilitate the sale and distribution of the company’s 
shares. 
(6) Information concerning discounts on front-
end sales loads for which investors may be eligible, 
including the minimum purchase amounts required 
for such discounts. 
(b) APPROPRIATE DISCLOSURE DOCUMENT.—
(1) IN GENERAL.—For purposes of subsection 
(a), a disclosure shall not be considered to be made 
in an appropriate disclosure document if the disclo-
sure is made exclusively in a prospectus or state-
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ment of additional information, or both such docu-
ments. 
(2) EXCEPTIONS.—Notwithstanding paragraph 
(1), the disclosures required by paragraph (2) and 
(4) of subsection (a) may be considered to be made 
in an appropriate disclosure document if the disclo-
sure is made exclusively in a prospectus or state-
ment of additional information, or both such docu-
ments.
(c) CONCEPT RELEASE REQUIRED.—
(1) IN GENERAL.—The Commission shall issue 
a concept release examining the issue of portfolio 
transaction costs incurred by investment companies, 
including commission, spread, opportunity, and mar-
ket impact costs, with respect to trading of portfolio 
securities and how such costs may be disclosed to 
mutual fund investors in a manner that will enable 
investors to compare such costs among funds.
(2) REPORT
AND
RECOMMENDATIONS
RE-
QUIRED.—The Commission shall submit a report on 
the findings from the concept release required by 
paragraph (1), as well as legislative and regulatory 
recommendations, if any, to the Committee on Fi-
nancial Services of the House of Representatives and 
the Committee on Banking, Housing, and Urban Af-
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fairs of the Senate, no later than 270 days after the 
date of enactment of this Act. 
(d) ADDITIONAL REQUIREMENT FOR FEE STATE-
MENT.—
(1) IN
GENERAL.—Not later than 270 days 
after the date of enactment of this Act, the Commis-
sion shall prescribe a rule to require, with respect to 
an open-end management investment company, in 
the quarterly statement or other periodic report, or 
other appropriate disclosure document, a statement 
informing shareholders that such shareholders have 
paid fees on their investments, that such fees have 
been deducted from the amounts shown on the state-
ments, and where such shareholders may find addi-
tional information regarding the amount of these 
fees. 
(2) APPROPRIATE
DISCLOSURE
DOCUMENT.—
The statement required by paragraph (1) shall not 
be considered to be made in an appropriate disclo-
sure document unless such statement is—
(A) made in each periodic statement to a 
shareholder that discloses the value of the hold-
ings of the shareholder in the securities of the 
company; and