New SEC Rule Establishes Ethics Standards for Mutual Funds

The Securities and Exchange Commission voted this week to adopt a new Rule 204A-1 under the Investment Advisers Act and related amendments to Advisers Act Rule 204-2, Advisers Act Form ADV, and Rule 17j-1 under the Investment Company Act.

New Rule 204A-1 would require registered investment advisers to adopt and enforce codes of ethics applicable to their supervised persons. The new rule is designed to prevent fraud by reinforcing the fiduciary principles that must govern the conduct of advisory firms and their personnel. An adviser's code of ethics will have to include certain minimum provisions.

  • Standards of Business Conduct - The code will be required to establish standards of conduct that are expected of the adviser's supervised persons and that reflect the adviser's fiduciary duties. Supervised persons will have to acknowledge, in writing, receipt of a copy of the code of ethics and any amendments.
  • Compliance with Federal Securities Laws - An adviser's code of ethics will have to require the adviser's supervised persons to comply with applicable federal securities laws.
  • Personal Securities Reporting - An adviser's code of ethics will have to require certain supervised persons called access persons to report their personal securities holdings and transactions, including transactions in mutual funds advised by the adviser or an affiliate.
  • Pre-Approval of Certain Transactions - The code of ethics will have to require access persons to pre-clear any personal investments in initial public offerings and limited offerings.
  • Reporting of Code Violations - The code of ethics will have to require supervised persons to report, promptly, any violations of the adviser's code of ethics to the firm's chief compliance officer or to other designated persons.

The compliance date for these provisions is Jan. 7, 2005.

You may like these other stories...

Being an accountant doesn't mean you're giving investment advice to clients. However, at tax time, accountants often have to deal with the results of any investment advice clients obtained during the year—the...
Anti Burger Kings: Seven US companies shrinking tax the old-fashioned wayBurger King’s decision to combine with Canadian donut shop Tim Hortons is renewing controversy over the lengths some US companies will go to...
A new report released on Tuesday found that the US airline industry receives nearly $1 billion in tax breaks annually from states for jet fuel.The study, conducted by UNITE HERE International Union, a labor union that...

Already a member? log in here.

Upcoming CPE Webinars

Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.