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Rating:SEC To Tighten Reins on Personal Trading Not Rated 3.0 Email Routing List Email & Route  Print Print
Thursday, May 13, 1999

SEC To Tighten Reins on Personal Trading

Reported by Jason Shank

According to Bloomberg.com, the Securities and Exchange Commission is nearing adoption of a long-awaited new rule that would tighten oversight of personal trading by portfolio managers at mutual fund companies, said Paul Roye, SEC investment-management director.

Several fund managers have been charged with conflict-of-interest violations in recent years for failure to disclose personal trades in securities being bought and sold by their funds.

The SEC plan, to be considered by commissioners in the next two months, would require fund compliance officers to review all personal trades by portfolio managers, Roye said.

Roye said that one of the main SEC concerns about personal trading involves "front-running" -- when a fund manager makes a personal trade right before he buys or sells a large amount of that same stock for the fund he manages. The fund trade can influence the stock price in a way that benefits the manager's portfolio.

Separately, the SEC, spurred by Congress, also may propose other rules that would require fund companies to disclose their after-tax performance to investors, Roye said. Funds' returns aren't adjusted now to take into account the taxes paid by investors on dividends and capital gains.

The SEC staff expects to make recommendations on tax-adjusted returns in the next three-to-six months, after it grapples with ways to convey the complex figures in a simple, standard format. The commission then would have to decide whether to issue the plan as a rule proposal for public comment, before deciding whether to give final approval. 

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