SEC Name Rule Takes Effect March 31
March 26, 2001
The Securities and Exchange Commission rule regarding fund investments' adherence to a fund's name, rule 35d-1, will take effect March 31. The rule imposes new requirements on the use of potentially misleading or deceptive fund names. Under the rule, investment companies will be required to have 80 percent of the assets of a fund correspond with the name of the fund. The standard had been 65 percent.
The new rule applies to fund names that suggest the industry in which the fund has its assets, investment in a particular geographic region, tax exempt status and government guarantee of the assets.
The new rule does not apply to terms such as balanced, index, small, mid-, or large capitalization nor terms such as growth or value. The Commission is still looking into those areas. The SEC had initially intended to require compliance by March 31, 2002, but the compliance date has been changed to July 31, 2002.