SEC Ruling Helps Investors Make Decisions

New rules approved by the Securities and Exchange Commission will require mutual funds to report their after-tax performance to investors. Traditionally, mutual fund companies have only disclosed returns before taxes.

The new guidelines require mutual funds to report both before- and after-tax performance, with after-tax performance stated at the maximum individual federal income rate of 39.6 percent, thus providing a worst case scenario. Funds will be required to display one-, five-, and 10-year after-tax returns in their prospectuses.

"Investors should have this information but do not now," said U.S. Rep. Paul E. Gillmor, (R-OH), the Congressman who originally introduced this legislation nearly two years ago. Gillmor noted that over the past 15 years, taxes have consumed more than 30 percent of the average stock fund's return.

Investors should take note that the reported after-tax performance may not be applicable to all investors, as the median income of mutual fund investors is only $55,000 per year, and the 39.6 percent tax rate doesn't become effective until taxable income exceeds $288,350.

The new disclosure requirement does not affect money market funds, nor does it affect tax-deferred investments such as 401(k) plans and variable annuities.

You may like these other stories...

The US Securities and Exchange Commission (SEC) has chosen a former partner and vice chairman with Deloitte LLP as its new chief accountant.James Schnurr, who specialized in financial and SEC reporting for public companies...
Summer is a time for kicking back and playing a few round of golf with friends, for example. But if you're on the green, you'd better be careful: The SEC may be looking over your shoulder.In July, the SEC announced...
An examination initiative launched by the US Securities and Exchange Commission (SEC) earlier this week will enable the agency to evaluate whether municipal advisors are complying with new SEC rules that went into effect...

Already a member? log in here.

Upcoming CPE Webinars

Sep 30This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 9In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards.
Oct 15This webinar presents the requirements of AU-C 600, Audits of Group Financial Statements (Including the Work of Component Auditors).
Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.