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Mutual Fund Fees: Additional Disclosure Could Encourage Price Competition

GGD-00-126 Published: Jun 07, 2000. Publicly Released: Jul 05, 2000.
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Highlights

Pursuant to a congressional request, GAO reviewed issues relating to mutual fund fees, focusing on: (1) the trend in mutual fund advisers' costs and profitability; (2) the trend in mutual fund fees; (3) how mutual funds compete; (4) how fees are disclosed to fund investors and how industry participants view these disclosures; and (5) what mutual fund directors' responsibilities are regarding fees and how industry participants view directors' activities.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
United States Securities and Exchange Commission To heighten investors' awareness and understanding of the fees they pay on mutual funds, the Chairman, Securities and Exchange Commission, should require that the periodic account statements already provided to mutual fund investors include the dollar amount of each investor's share of the operating expense fees deducted from their funds. This disclosure would be in addition to presently required fee disclosures. Because these calculations could be made in various ways, SEC should also consider the cost and burden that various alternative means of making such disclosures would impose on: (1) the industry; and (2) investors as part of evaluating the most effective way of implementing this requirement. Where the form of these statements is governed by National Association of Securities Dealers (NASD) rules, SEC should require NASD to require the firms it oversees to provide such disclosures.
Closed – Implemented
In February 2004, SEC staff issued a final rule that will expand the fee-related disclosures for mutual funds. The disclosures require that fund shareholder reports include a table that shows the cost in dollars associated with an investment of a standardized amount ($1,000) that earned the fund's actual return for the period, and incurred the fund's actual expenses for the period.

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Topics

Brokerage industryCompetitionFeesInformation disclosureInvestmentsMutual fundsSecurities regulationSecuritiesMutual fund industryShareholders