SEC backs legislation to address mutual-fund product | VailDaily.com
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SEC backs legislation to address mutual-fund product

WASHINGTON – Securities regulators support legislation to address a kind of mutual-fund product chiefly sold to military personnel.In testimony prepared for delivery Thursday to the Senate Banking Committee, a Securities and Exchange Commission official said the SEC endorses legislation to address certain features of mutual-fund contractual plans, also known as periodic payment plans, that make the plans “susceptible to abuses.”The Securities and Exchange Commission supports legislation addressing the plans, but does not support banning them outright.Lori Richards, head of the SEC’s Office of Compliance, Inspections and Examinations, said the SEC has conducted a “sweep” examination focusing on these kinds of mutual-fund products, which are typically sold to military personnel. Richards said a second “sweep” by the SEC examined sales of all kinds of securities products to military personnel.Richards said the SEC strongly agrees that Congress should adopt legislation to protect military service members from features of mutual-fund contractual plans that make these products “susceptible to abuses and misleading sales practices and excessive fees.”Most mutual-fund contractual plans carry high upfront sales charges, known as a front-end load, and initial investments may be reduced by as much as half to cover the sales charges. As a result, investors in such products who redeem their holdings quickly pay abnormally large sales charges. The SEC said newer mutual-fund products carry much lower fees and that few civilians now invest in mutual funds with periodic payment plans.Vail, Colorado


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