SEC RESPONSE TO SECOND CONGRESSIONAL REQUEST FOR INFORMATION ON MUTUAL FUND INDUSTRY ISSUES

[16217] June 19, 2003 TO: BOARD OF GOVERNORS No. 29-03 PRIMARY CONTACTS - MEMBER COMPLEX No. 48-03 SEC RULES MEMBERS No. 77-03 DIRECTOR SERVICES COMMITTEE No. 9-03 FEDERAL LEGISLATION MEMBERS No. 8-03 PUBLIC INFORMATION COMMITTEE No. 18-03 RE: SEC RESPONSE TO SECOND CONGRESSIONAL REQUEST FOR INFORMATION ON MUTUAL FUND INDUSTRY ISSUES Earlier this year, following a hearing on mutual fund practices, House Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises Ranking Minority Member Paul E. Kanjorski (D-PA) and Congressman Robert W. Ney (R-OH) sent a letter to the Securities and Exchange Commission soliciting the SEC’s views on various mutual fund issues.1 The SEC recently sent its response, consisting of a letter from SEC Chairman William Donaldson, transmitting a memorandum prepared by the Division of Investment Management to Congressmen Kanjorski and Ney (the “SEC Response”). A copy of the SEC Response is attached. The SEC Response is substantially similar to the response from the SEC to a letter from Subcommittee Chairman Richard H. Baker (R-LA) on similar mutual fund issues.2 In particular, the SEC Response covers such issues as transparency of mutual fund fees and transaction costs, soft dollar and directed brokerage arrangements, mutual fund governance, payments for distribution (including 12b-1 fees and “revenue sharing” arrangements) and mutual fund performance information. Matthew P. Fink President Attachment (in .pdf format) 1 See Memorandum to Board of Governors No. 16-03, Director Services Committee No. 4-03, Federal Legislation Members No. 5-03, Primary Contacts – Member Complex No. 29-03, Public Information Committee No. 8-03 and SEC Rules Members No. 37-03 (15809), dated March 27, 2003. 2 See Memorandum to Board of Governors No. 27-03, Director Services Committee No. 7-03, Federal Legislation Members No. 7-03, Primary Contacts – Member Complex No. 44-03, Public Information Committee No. 15-03 and SEC Rules Members No. 69-03 (16181), dated June 11, 2003. 2 Note: Not all recipients receive the attachment. To obtain a copy of the attachment, please visit our members website (http://members.ici.org) and search for memo 16217, or call the ICI Library at (202) 326-8304 and request the attachment for memo 16217.