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WASHINGTON -- In another major push for disclosure, the

Securities and Exchange Commission

wants the nation's 20,000 investment advisory firms to tell more about who they are and how they do business, so that it can be communicated to investors on the Web.

The proposal, which the agency staff put forth in April, has received little publicity. But it would significantly bolster 60-year-old investor protection rules covering many money managers, financial planners and others providing investment advice.

The plan, although controversial, could be adopted as early as this fall.

Investor advocates are cheering the proposal, which would combine mandatory electronic registration for investment advisers with greatly expanded disclosure requirements, including forcing advisers to reveal how they vote

client proxies.

"These proposals should greatly enhance the ability of investors to make informed choices," says Barbara Roper, investor protection director for the

Consumer Federation of America


Big players in the investment adviser industry have lined up against it, arguing that the plan's key disclosure rules would be too costly and unwieldy and would end up confusing investors with far more information than they could ever use or understand.

"I was surprised there was so much resistance to disclosure," says Linda L. Rittenhouse, an attorney for the

Association for Investment Management and Research

, a nonprofit investment education and advocacy group. "We think the investor needs more information, as opposed to less. You give the investor the information, and let them make the decision."

SEC senior staffers hope the full commission will approve the proposal as early as September. The last of the public comments are now trickling in.

The plan would create a system called the

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Investment Adviser Registration Depository

, or IARD, which will allow investment advisers to meet state and federal filing requirements by making a single electronic filing. SEC staffers hope that could begin by early next year.

But that would be only the start of it.

Much like the SEC's popular EDGAR program, which provides online access to corporate filings, or the CRD system from

NASD Regulation Inc.

, which provides information on broker-dealers, the new IARD system would store investment adviser filings in a database publicly available through the Internet.

As proposed, the filings would include details on business ownership, business practices, investment strategies, affiliations, investor fees, disciplinary history, conflicts of interest advisers may have with clients, whether advisers have been charged with a crime, adviser bankruptcies and more.

Included will be a plain English, narrative-style brochure about an investment advisory firm -- a big improvement over today's often technical or boilerplate-style disclosures. Firms would be required to update these brochures with important changes. The plan also calls for short personal profiles to be distributed, in the form of supplements to the brochure, for each person preparing or providing advice. Those, however, would not be posted online.

A Library for the Open Book

All this will give investors unprecedented access to a wide range of information about the nation's 8,000 federally registered investment firms, 12,000 state-registered firms and the tens of thousands of people working for them.

The SEC staff has been working on ways to computerize aspects of this information and make it available online since the late 1980s. But with the growth of the Internet making the process far simpler, the plan has grown more ambitious, and the agency has both the administration and Congress pushing for greater disclosure.

The current plan would be perhaps the most significant update of rules based on the

Investment Advisers Act of 1940

. A cornerstone of the nation's security laws, the act relies on disclosure to give investors information to make good decisions about investment advisers and the products and services they offer.

The IARD system is being built and will be operated by NASD Regulation, a subsidiary of the

National Association of Securities Dealers

. NASD Regulation oversees the securities industry and the

Nasdaq Stock Market


Plenty of work remains to be done, not only completing the IARD but securing the cooperation of the states. If electronic filing does indeed begin early next year, the SEC hopes to start making the first round of information available online by mid-2001 and complete the process in 2002, when the adviser brochures would be available on the Internet.

Major industry groups say they support electronic filings, but are fighting the disclosure provisions as duplicative, intrusive and burdensome. They complain about the need to update information, the need to prepare supplements for individual advisers, and various specific disclosure provisions, such as disclosure of criminal charges or commission orders issued against advisers or their firms.

Industry groups also oppose other disclosure ideas that are not part of the formal proposal, but which the SEC also sought comment on. These include disclosure of arbitration awards and higher advisory fees for producing higher returns.

Who Cares?

But, industry executives say, their opposition doesn't mean they're afraid of disclosure.

"This industry is probably the most disclosed in the history of man," says Michael D. Udoff, an adviser to a

Securities Industry Association

committee that studied the proposal. "What we're concerned about is disclosure that's so detailed it doesn't get read, or if it is read, it's prone to misinterpretation."

For instance, the narrative brochures would become so lengthy and technical that few would want to crack them open, industry executives say. "It should be short and simple enough for clients to be able to read and understand, not bogged down with details on policies," says Karen L. Barr, general counsel of the

Investment Counsel Association of America

, an investment advisers trade group.

Another issue for the industry: Advisory firms fear that disclosures about, say, soft dollar practices -- that is, when advisers steer customers' orders to certain brokers in exchange for services in return, such as research reports -- could create the impression that such deals are automatically bad for investors.

"As with everything, some people do them well, and some people don't do them so well," says Udoff.

Supporters acknowledge the overload concerns, but say that overall the SEC has hit the mark. "Too much can simply be too much, and investors can shut down (but) the SEC proposal achieves a good balance," says Rittenhouse.

Robert Plaze, associate director in the SEC's investment management division, says some in the industry appear to have overreacted. He expects some changes in the final proposal to be presented to the commission, but says it's premature to discuss them now.

"Every rule-making, someone is unhappy," he says. "I don't see any insurmountable issues. What you see now appear to be polar opposites.

But between the two positions are many options to reconcile."