IOSCO Examines Funds’ Cross-Border Performance Disclosure Standards

Washington, DC, July 17, 2002 - The International Organization of Securities Commissions (IOSCO) has requested comment on a report on “collective investment funds” performance presentation standards. The report reviews the standards currently used by member jurisdictions with respect to performance presentations in funds, including fund advertisements and marketing materials and articulates general regulatory principles based on this review. Comments on the report are due to IOSCO by September 30, 2002.

The report specifically seeks comment on a set of general principles for the regulation of fund performance presentations:

• Fund performance presentations raise investor protection concerns when performance is calculated inaccurately or presented in a misleading manner.
• Regulators can take different approaches to ensuring that investors are not misled, such as enforcing a general prohibition on false and misleading statements about funds’ performance or adopting or endorsing standards for the calculation and presentation of funds’ performance information.
• The use by regulators of these standards can protect investors from being misled by performance information and facilitate the ability of investors to compare fund performance.
• These standards can be established by the regulator, an SRO, a professional organization, or other group. The standards can be mandatory or voluntary; mandatory, enforceable standards may be more effective, although voluntary standards can be effective if competitive or other pressures effectively force a fund to comply with them.
• Standards may vary depending on the type of fund.
• The need for comprehensive standards may vary from jurisdiction to juristiction, depending on the maturity of the fund industry, current advertising practices, and the history of abuses, if any.