December 22, 2006
Mutual Fund Disclosures
There is a wonderful piece in today's Wall Street Journal by Kaja Whitehouse and Tom Lauricella (Voting Records at Mutual Funds: Still a Hard Read) on how mutual funds are complying with the rules requiring the funds to disclose their votes as shareholders of portfolio companies. The funds fought the rules tooth and nail and still hate them. So what happens? They turn to lawyers, skilled at obscuring disclosure obligations in civil litigation, and say "Do the minimum." Under the obligation to disclosure general voting policies, lawyers hide under open-ended boilerplate. With the obligation to disclose specific votes, lawyers provide long lists of individual votes (no detail, no compilation or organization). Some funds are cooperative, but they are few. The results are an embarrassment to David Ruder, past SEC Chairman and current Chairman of the Mutual Fund Directors Forum, who says boards will pay more attention to this "in the future." No they won't, unless the SEC makes them. The lesson is an old one: Disclosure rules forced on unwilling folks require enforcement muscle, exercised consistently over time.
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