WASHINGTON (Dow Jones/AP) - U.S. money managers would have to provide online brochures describing their services, fees, investment performance and potential conflicts of interest under a proposal approved Wednesday by the Securities and Exchange Commission.
The SEC voted 3-0 to float long-awaited changes to information provided by investment advisers to current and prospective clients. As proposed, advisers would have to supply "user-friendly" plainly written brochures to supplement bare-bones information now available online.
U.S. regulators first called for expanded online disclosure from advisers in 2000 but the idea proved controversial and the SEC eventually settled on a requirement for advisers to provide basic information online, leaving details in printed brochures.
Although advisers now may provide online brochures to state regulators, they are not required to supply them to the SEC or investors. Moving to a mandatory electronic filing to state and federal regulators is expected to reduce compliance costs for nearly 10,000 U.S. investment advisers and yield savings on printing and mailing.
SEC Commissioner Paul Atkins said the revised proposal is much better than the one offered in 2000, but questioned whether the level of detail sought by the agency might produce lengthy brochures that are "unappealing" to investors.
"More disclosure is not always better," warned Atkins.
SEC staffers said the online brochures need not be hefty, suggesting the required information might be packaged into a 12-page document.
In addition to services, fees and past performance, the SEC is calling for background information on advisers and details on the adviser's business practices and potential conflicts posed by those practices. For instance, advisers would have to describe how they select brokers to execute client transactions, including any so-called "soft dollar" arrangements. Such deals, allowed by law, permit advisers to pay above-average commissions to brokers who provide the adviser with items such as research that benefit advisery clients. The SEC is seeking similar disclosure on advisers' participation in sales contests.
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