Representative Richard Baker
is backing away from key provisions of his mutual fund reform bill. The changes to the bill came as the Louisiana Republican pulled dropped it from the House capital markets subcommittee schedule on Friday. Instead of going to the subcommittee the much-modified bill is set to be considered by the House Financial Services Committee this week.
Baker reportedly made the changes to the bill after coming up against steadfast opposition among Democrats and finding only lukewarm support among Republicans. The lack of Democratic support for the bill and its increased disclosure of fees surprise to some consumer advocacy groups, including AARP and the Consumer Federation of America, reports Dow Jones Newswires
Rather than immediately require funds to disclose their fees and other costs, the bill now calls for further study into the issue. It also drops a requirement that funds provide individuals with the specific fees charged to their account. Instead, it will let funds disclose fees as a cost per $1,000 invested in the fund. It will also let the SEC determine how and how often the disclosure must be made.
The newest version of the bill retains requirements that funds have an independent board chairperson. It also keeps the provision authorizing an 18-month SEC study of soft-dollar use in funds. It also tightens the definition of a no-load fund and calls for the SEC to create rules within nine months that ban funds that charge 12b-1 fees from labeling themselves as no load.
Whether and how funds should disclose trading costs will be the subject of a nine-month study at the SEC. That provision was added through an amendment authored by Rep. Spencer Bachus (R-Alabama).
Baker faced a revolt in the subcommittee if he went ahead with the bill in its initial form, according to Dow Jones. Reps. Patrick Toomey (R-Pennsylvania) and Michael Capuano (D-Massachusetts) were planning to offer an amendment eliminating individual dollar-based fee disclosure. Meanwhile Reps. Paul Kanjorski (D-Pennsylvania) and Pat Tiberi (R-Ohio) were prepared to eliminate the requirement that fund boards have an independent chairman.
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