![]() These costs, however, must be disclosed to a fund's board of directors where such costs bear on the reasonableness of the fund's payments to the fund manager or its affiliates. As explained in further detail below, transaction costs are not readily apparent to investors. 3įund directors play a pivotal role in monitoring these conflicts. Commissions, which are paid out of fund assets, may, for example, be used to pay for research or trading support functions (brokerage services) that might otherwise be paid for by the fund's investment adviser (soft dollar commissions). 2 Second, fund managers are subject to a number of conflicts. One study estimates that commissions and spreads alone cost the average equity fund as much as 75 basis points. First, for many funds, the amount of transaction costs incurred during a typical year is substantial. Transaction costs are significant for two reasons. Mutual funds incur transaction costs when they buy or sell portfolio securities. The Securities and Exchange Commission ("Commission") is considering various alternatives designed to improve the information that mutual funds disclose about their portfolio transaction costs. 1įor Further Information Contact: Paul Goldman, Assistant Director, or Jacquelyn Rivas, Staff Accountant, Office of Financial Analysis, Division of Investment Management, (202) 942-0510, at the Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0506. Electronically submitted comment letters will be posted on the Commission's Internet website ( ). Comment letters will be available for public inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. This file number should be included in the subject line if electronic mail is used. Comments also may be submitted electronically at the following electronic mail address: All comment letters should refer to File No. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. ![]() Comments sent by hard copy should be submitted in triplicate to Jonathan G. The Commission requests comment from investors, investment companies, investment advisers, the financial services industry, academics, regulators, and the public generally on the issues summarized in this release, the specific questions located in Sections III (Alternatives for Quantifying Transaction Costs), IV (Accounting Issues), V (Alternatives that Provide Additional Information About the Level of Transaction Costs), and VI (Review of Transaction Costs by Fund Directors) of the release, and on any other issues that commenters believe relevant.ĭates: Comments must be received by February 23, 2004.Īddresses: To help us process and review your comments more efficiently, comments should be sent by hard copy or electronic mail, but not by both methods. We also seek comment on whether mutual funds should be required to record some or all of their transaction costs as an expense in their financial statements. We seek comment on, among other things, whether mutual funds should be required to quantify and disclose to investors the amount of transaction costs they incur, include transaction costs in their expense ratios and fee tables, or provide additional quantitative or narrative disclosure about their transaction costs. Summary: The Securities and Exchange Commission is seeking public comment on a number of issues related to the disclosure of mutual fund transaction costs. Agency: Securities and Exchange Commission ("Commission").Īction: Concept release request for comments.
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