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bonnie "Separately, the SEC voted to propose a measure that would discourage companies from issuing securities that can't be easily transferred among market intermediaries. Some companies have started doing this to thwart "naked" short-sellers.

Short sellers borrow shares of stock, sell them, wait for the price to fall and then buy them back more cheaply at a profit. Naked shorts practice this risky strategy without first establishing clear control over the shares they're shorting.

The SEC is working on a new rule, known as Regulation SHO, to address naked shorting and other short-selling issues.

In adopting the rule to discourage non-transferable share issuance, the SEC said such shares work against its long-held goal of making the national clearance and settlement system more efficient. Officials said the naked short-selling problem will be better addressed within the Regulation SHO context. "

SEC: Mutual Funds Must Disclose More
Wed May 26, 2004 12:49 PM ET
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By Kevin Drawbaugh WASHINGTON (Reuters) - Mutual funds must begin disclosing more in their prospectuses about sales fee discounts that some large investors have been unfairly denied, the U.S. Securities and Exchange Commission ordered on Wednesday.

In a 4-0 vote, the SEC said funds will have to give out more and clearer information about so-called "breakpoint" discounts -- the focus of a recent legal settlement.

Fifteen brokerage firms were disciplined in February by regulators and agreed to pay $21.5 million in combined fines for failing to grant breakpoint discounts during 2001 and 2002 to investors who should have gotten them.

The new disclosures mandated by the SEC "will help to ensure that investors understand the breakpoints that are due to them," said SEC Chairman William Donaldson at a meeting.

Breakpoint discounts are awarded to buyers of large blocks of front-end-load fund shares on a graduated basis, depending on the size of the purchase. Mutual funds will have to start providing the additional disclosures by Sept. 1.

The commission also voted 4-0 to adopt a rule requiring mutual fund investment advisory firms to have codes of ethics for their advisers. The rule is one of many being considered amid a wave of abuses in the $7.6 trillion fund industry.

Improper and illegal trading in fund shares, sometimes involving officers of the advisory firms managing the funds, has been revealed as a widespread problem in the industry.

Donaldson called it "extremely troubling" that much of the misconduct brought to light involved basic ethical failures.

"Advisers owe their clients more than mere honesty and good faith. Recent experience suggests that all too many advisers were delivering much less," Donaldson said.

Separately, the SEC voted to propose a measure that would discourage companies from issuing securities that can't be easily transferred among market intermediaries. Some companies have started doing this to thwart "naked" short-sellers.

Short sellers borrow shares of stock, sell them, wait for the price to fall and then buy them back more cheaply at a profit. Naked shorts practice this risky strategy without first establishing clear control over the shares they're shorting.

The SEC is working on a new rule, known as Regulation SHO, to address naked shorting and other short-selling issues.

In adopting the rule to discourage non-transferable share issuance, the SEC said such shares work against its long-held goal of making the national clearance and settlement system more efficient. Officials said the naked short-selling problem will be better addressed within the Regulation SHO context.

http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5264636