SEC Adopts Rule Aimed at Curbing Misleading Fund Names

The Securities and Exchange Commission announced Wednesday that it has adopted a rule that will require mutual funds to invest at least 80% of their assets in those securities that the fund's name suggests, replacing the 65% cutoff previously required.

The SEC said the rule is intended to provide investors greater assurance that a fund's investments are consistent with its name and to help reduce investors' confusion when they are choosing specific types of funds.

Any fund wishing to change the 80% investment policy must first obtain the approval of shareholders or notify shareholders at least 60 days in advance of the change. Funds whose names do not connote a particular type of investment are not obligated to this rule, the SEC said in a press release.

The "names" rule, as it is commonly known, was first proposed in February 1997 but has recently attracted the support of many shareholder advocacy groups.

This latest adoption is one of many mutual fund regulations that the commission had been expected to pass this year before SEC Chairman Arthur Levitt steps down in February.