Mutual Fund Reform Bills in the 108th Congress: A Side-by-Side Comparison

CRS Report for Congress
th
Mutual Fund Reform Bills in the 108 Congress:
A Side-by-Side Comparison
Updated February 2, 2005
Mark Jickling
Specialist in Public Finance
Government and Finance Division

Congressional Research Service ˜ The Library of Congress

Mutual Fund Reform Bills:
A Side-by-Side Comparison
Summary
The mutual fund was embroiled in scandal in September 2003, when New York
Attorney General Eliot Spitzer brought charges against a few mutual funds, brokers,
and hedge funds. Subsequently, the New York investigation widened, and the
Securities and Exchange Commission (SEC) intensified its scrutiny of mutual funds.
A number of illegal or unethical practices came under investigation: the common
theme is that fund managers and insiders have permitted favored customers,
including hedge funds, to engage in highly profitable short-term trading strategies
that reduce the investment returns of millions of long-term investors. A number of
firms have paid fines to settle civil charges. The SEC reported (in testimony before
the Senate Governmental Affairs Committee on November 3, 2003) that preliminary
investigations indicated that trading practices that appear to be abusive (but not in all
cases illegal) were widespread in the industry.
The congressional response to the mutual fund investigations included several
hearings and bills. Legislative proposals in the 108^th Congress included H.R. 2420
(Representative Baker), which passed the House on November 19, 2003; S. 1822
(Senator Akaka), introduced November 5, 2003; S. 1958 (Senators Kerry and
Kennedy), introduced November 25, 2003; S. 1971 (Senators Dodd and Corzine),
also introduced on November 25, 2003; and S. 2059 (Senators Fitzgerald, Levin, and
Collins), introduced on February 10, 2004.
All of these bills would have required mutual funds to provide more information
to investors about the fees they charge and about the funds’ financial relationships
with stockbrokers and investment advisers. The bills also required that funds’
governing boards contain majorities of independent directors with no financial or
family ties to fund management. S. 1958 proposed the creation of a new mutual fund
regulator to carry out registration, inspections, and disciplinary proceedings, and to
make rules promoting mutual fund ethics and independence.
None of these bills was enacted by the 108^th Congress. However, the SEC,
using its existing statutory authority, has issued rules that incorporate some of the
provisions of the legislative proposals. For instance, the SEC has mandated that
mutual fund boards have an independent chairman and a majority of independent
directors. Other regulations are under consideration and the SEC appears to have
become more vigilant and aggressive in its oversight of the funds. Thus, unless new
scandals appear, some may now see the need for reform legislation as less pressing.
This report compares the provisions of these legislative proposals. It serves as
an historical record of legislative activity in the 108^th Congress, and will not be
updated.

Contents
Side-by-Side Comparison of Mutual Fund Reform Legislation in the
108^th Congress............................................2
New Regulatory Structure...................................2
Disclosure and Regulation of Mutual Fund Fees and Costs.........3
Soft Dollar, Revenue Sharing, and Directed Brokerage
Arrangements .........................................6
Mutual Fund Governance...................................7
Restrictions on Late Trading, Market Timing, and Other Forms of
Trading .............................................13
Other Provisions.........................................16
Studies and Reports Called For..............................17

Mutual Fund Reform Bills:
A Side-by-Side Comparison
The mutual fund scandal began in September 2003, when New York Attorney
General Eliot Spitzer brought civil and criminal charges against a few mutual funds,
brokers, and hedge funds. Since then, the New York investigation has widened, and
the Securities and Exchange Commission (SEC) has intensified its scrutiny of mutual
funds. Several illegal or unethical practices are under investigation: the common
theme is that fund managers and insiders have permitted favored customers,
including hedge funds, to engage in highly profitable short-term trading strategies
that reduce the investment returns of millions of long-term investors. The number of
firms and individuals charged to date is fairly small, but growing. The SEC reported
(in testimony before the Senate Governmental Affairs Committee on November 3,
2003) that preliminary investigations indicate that trading practices that appear to be
abusive (but not in all cases illegal) are fairly widespread in the industry.
Congressional response to the mutual fund investigations took the forms of
hearings and proposed legislation. On November 19, 2003, the House passed a
mutual fund reform bill, H.R. 2420, by a vote of 418-2. In the Senate, four bills were
introduced — S. 1822, S. 1958, S. 1971, and S. 2059 — but none saw committee
action.
All the bills would have required mutual funds to make more extensive
disclosure of the fees and charges that investors pay. Financial relationships among
mutual funds, brokers, and investment advisers would also have to be disclosed.
Under three of the bills, brokers selling mutual funds would have had to disclose how
their compensation was structured, including any incentives for selling particular
funds.
The proposals would all have required mutual funds’ boards of directors to
contain majorities of independent directors — those not affiliated with the funds or
its advisers. The bills also included various provisions to enhance the oversight role
of the board, in matters such as auditing, nomination of directors, and supervision of
ethical and legal compliance.
S.1958 proposed an independent regulator for mutual funds, to operate under
the oversight of the SEC. S. 2059 would repeal SEC Rule 12b-1, which permits
funds to charge investors for certain marketing, advertising, and distribution costs.
Finally, the proposals called for a number of reports or studies on subjects
including the creation of an independent regulator for mutual funds, the SEC’s
enforcement record, “soft dollar” arrangements (financial links among brokers,
advisers, and funds), transaction costs, arbitration in mutual fund disputes, fund
advertising, and the financial literacy of mutual fund investors.

CRS-2
Side-by-Side Comparison of Mutual Fund Reform Legislation in the 108^th Congress
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^o^r^{t T}^itle^Mu^tu^{al Fu}ⁿ^d^{s I}ⁿ^teg^r^ity^M^u^t^u^a^l^Fund^M^u^t^u^a^l^Fund^I^nve^st^o^r^M^u^t^u^a^l^Fund^I^nve^st^o^r^Mu^tu^{al Fu}ⁿ^d^Ref^o^r^m^A^c^{t o}^f
^an^{d Fee T}^r^an^s^p^aren^cy^A^c^t^T^r^an^s^p^aren^cy^A^c^{t of}^Prot^ectⁱ^oⁿ^A^c^t^of²⁰⁰³^C^oⁿ^f^iden^{ce R}^e^s^t^oration^A^c^t²⁰⁰⁴
^of²⁰⁰³²⁰⁰³^of²⁰⁰³
^Ne^w^Re^gula^t^or^y^S^t^r^u^c^t^ur^e^.
^w^m^u^t^u^a^l^fund^No^p^r^o^v^isioⁿ^.^{SEC sh}^{all stu}^d^y^an^d^Estab^lish^e^{s a Mu}^tu^{al Fu}ⁿ^d^GA^{O is}^{directed to s}^t^u^d^y^{Directs GA}^{O to}^stu^d^y^th^e
^a^t^o^r^r^e^p^o^r^{t to}^Coⁿ^g^r^{ess o}ⁿ^th^e^Ov^ersⁱ^g^h^t^B^o^{ard to reg}ⁱ^s^t^er^th^{e f}^easib^ility^an^d^b^eⁿ^e^f^its^ef^fⁱ^cacy^of^th^{e SEC}^’^s^cu^rren^t
^cr^eatioⁿ^o^f^an^en^tity^w^ith^m^u^tu^{al f}^uⁿ^d^{s an}^d^estab^lish^(if^an^y⁾^{to s}^h^areh^olders^of^o^r^gaⁿⁱ^z^a^tⁱ^o^na^l^st^r^u^c^t^ur^e^a^sⁱ^t
ⁱⁿ^sp^ectioⁿ^an^d^ethⁱ^{cal, q}^u^ality^coⁿ^t^r^o^l,^e^s^t^a^b^lⁱ^s^hi^{ng a}^M^u^t^u^a^l^Fund^af^f^ects^th^{e reg}^u^l^ation^of^m^u^tu^al
ⁱ^{ki/CRS-RL32157}^en^f^o^rcem^en^{t au}^th^orityⁱⁿ^terⁿ^{al au}^d^itin^g^,^Ov^ersⁱ^g^h^t^B^o^{ard w}^ith^fund^s.
^g/w^ov^{er m}^u^t^u^al^f^uⁿ^d^boardsⁱⁿ^depen^d^en^{ce, an}^{d ot}^h^e^rⁱⁿ^sp^ectioⁿ^,^ex^amⁱⁿ^atioⁿ^,^(S^{ec. 412)}

^s^.or^of^di^rect^ors^,^f^uⁿ^d^{ed by}^s^t^an^dards^.^T^h^{e B}^o^{ard w}^ill^an^{d en}^f^o^rcem^en^{t au}^th^ority
^le^ak^a^sse^ssm^eⁿ^{ts o}ⁿ^m^u^tua^l^coⁿ^d^u^c^{t in}^sp^ectioⁿ^s^an^d^ov^{er m}^u^t^u^al^f^uⁿ^d^boards^of
^f^uⁿ^d^s^,^an^{d appoi}ⁿ^t^{ed by}ⁱⁿ^v^e^stig^atioⁿ^s^o^f^m^u^tu^al^di^rect^ors^.
^://wiki^th^{e SEC.}^f^uⁿ^d^s^,^an^{d m}^a^yⁱ^m^pos^{e a}^(S^{ec. 401)}
^h^ttp^{(Sec. 3(e))}^r^a^nge^o^f^sa^nc^tⁱ^o^ns,ⁱⁿ^c^l^udⁱⁿ^g^civ^{il f}ⁱⁿ^e^s^.^T^h^{e B}^o^{ard w}^ill
^ha^ve^fi^ve^m^e^m^b^e^r^s,
^appoiⁿ^t^{ed by}^t^h^{e S}^E^C^t^o^fⁱ^v^e
^y^{ear term}^s^.^T^h^{e SEC}^w^ill
^ha^ve^o^v^e^r^si^ght^a^u^t^h^o^rⁱ^t^y^,
ⁱⁿ^c^l^udⁱ^{ng t}^h^e^rⁱ^ght^o^f^p^rⁱ^o^r
^approv^al^{(or m}^odi^fⁱ^catⁱ^oⁿ⁾
^o^f^{all th}^{e B}^o^ar^d^’^{s r}^u^{les. T}^h^e
^Board’^s^bu^dg^et^(t^{o be}
^s^u^bj^ect^t^o^S^E^C^approv^al⁾
^w^{ill b}^e^fund^e^d^b^y^aⁿ^a^nnua^l
^a^sse^ssm^eⁿ^{t up}^oⁿ^r^e^giste^r^e^d
^m^u^t^u^a^l^fund^s.
⁽^T^{itle I}^I⁾

CRS-3
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^{Disclosure and Regul}^{ation of M}^u^{tual Fund Fees and Costs.}
^prov^ed^Dir^{ects th}^{e SEC to}^r^e^q^u^ir^e^B^r^o^k^er^{s sellin}^g^m^u^tu^al^Dir^{ects th}^{e SEC to}^r^e^vⁱ^{se its}^Dir^{ects SEC to}^r^e^q^u^ir^e^Dir^{ects th}^{e SEC to}^m^a^k^e^r^u^les
^lo^sur^e^o^f^peri^odi^{c di}^s^c^l^o^s^u^{re of}^:^f^uⁿ^d^s^w^o^u^l^{d be requ}ⁱ^r^ed^r^e^g^u^l^atioⁿ^s^to^r^e^q^u^ir^e^dⁱ^sc^lo^sur^e^o^f^:^s^e^t^tⁱⁿ^g^f^o^rt^h^s^t^an^dardi^{zed f}^o^rm^s
^tu^{al f}^uⁿ^d^f^ees^{(1) th}^{e es}^tim^{ated am}^ouⁿ^t^,^to^dⁱ^sclo^{se to}^th^eir^dⁱ^sc^lo^sur^e^o^f^:⁽¹⁾^th^{e actu}^a^{l d}^o^llar^am^o^uⁿ^t^of^di^s^c^l^o^s^u^{re of}^as^m^aⁿ^y
^{d cos}^t^sⁱⁿ^dol^l^a^rs^{per $1000}^cu^s^t^om^ers^{(1) th}^{e es}^tim^{ated dollar}^born^e^by^each^s^h^areh^older^operatin^g^an^{d tran}^s^action^cos^t^s
ⁱⁿ^v^e^s^t^{ed, of}^operatⁱⁿ^g^th^{e am}^ouⁿ^t^of^a^m^o^unt^o^f^t^h^e^fund^’s^of^th^{e f}^uⁿ^d^’^s^ex^pen^s^es^;^th^{at are born}^e^by^s^h^areh^olders^as
^ex^pen^s^es^born^e^by^co^m^p^en^satioⁿ^to^b^e^operatⁱⁿ^g^ex^pen^s^es^born^e^by^{(2) th}^{e s}^t^ru^ctu^r^{e an}^{d total}^is^{practicable. T}^h^{e SEC}^s^h^all
^s^h^areh^ol^ders^;^{(2) h}^o^w^t^h^e^receiv^e^{d by}^th^{e brok}^er.^each^s^h^areh^{older (an}^d^th^e^am^ouⁿ^t^of^com^p^en^s^a^tion^a^l^so^r^e^q^u^ir^e^fund^{s to}^dⁱ^sc^lo^se
^fund^p^a^y^sⁱ^nve^st^m^e^nt^Suc^h^dⁱ^sc^lo^sur^e^m^u^{st b}^e^am^ouⁿ^t^{per $1000 i}ⁿ^v^e^s^t^ed);^p^aⁱ^d^t^oⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^,^a^nnua^l^l^y^t^h^e^d^o^l^l^a^r^a^m^o^unt^o^f
^advⁱ^s^e^rs^{, an}^{d th}^os^e^m^a^d^e^b^e^f^o^r^e^th^{e sale is}⁽²⁾^ho^w^t^h^e^fund^p^a^y^s^aⁿ^d^a^d^vi^se^r^s^{’ i}^nve^st^m^e^nt^s^s^u^ch^cos^t^s^ch^arg^e^{d to each}
^a^d^vi^se^r^s^{’ i}^nve^st^m^e^nt^{s i}ⁿ^fi^na^l^.ⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^,^aⁿ^dⁱⁿ^th^{e f}^uⁿ^d^;^cu^s^t^om^er’^s^accouⁿ^t^{, bas}^e^{d on}^th^e
ⁱ^{ki/CRS-RL32157}^th^{e f}^uⁿ^d^{; (}³⁾^th^{e r}^a^{te at}^w^h^ich^th^{e f}^uⁿ^d^tu^rⁿ^{s o}^v^er^{(Sec. 2(a))}^t^h^o^s^e^a^d^vi^se^r^s^{’ ho}^l^dⁱ^{ngs i}ⁿ^t^h^e^fund^;^{(3) t}^h^{e dol}^l^a^{r am}^ouⁿ^t^s^of^al^l^pay^m^en^t^s^m^a^{de by}^t^h^e^va^l^u^e^o^f^c^u^st^o^m^e^r^{s’ ho}^l^dⁱ^ngs.^T^h^{e S}^E^C^w^o^u^l^{d def}ⁱⁿ^e^w^hⁱ^c^h
^g/w^{its p}^o^r^tf^o^lio^{; (}⁴⁾^h^o^w^th^e^F^uⁿ^d^s^w^o^u^l^{d be requ}ⁱ^r^ed⁽³⁾^th^{e r}^a^{te at w}^h^ich^th^e^f^uⁿ^d^{, set o}^u^{t so}^{as to}^p^e^r^m^it^ex^pen^s^es^an^{d cos}^t^s^cou^l^{d be}
^s^.or^fund^p^a^y^s^c^o^m^mⁱ^ssioⁿ^{s to}^{to in}^clu^d^{e th}^{e cos}^t^of^f^uⁿ^d^tu^rⁿ^{s o}^v^er^{its p}^o^r^tf^o^lio^;^com^p^aris^on^am^on^g^f^uⁿ^d^s^;^ch^arg^e^{d to s}^h^areh^olders^{. (Sec.}
^le^ak^brok^ers^w^h^{o prov}ⁱ^d^e^brok^erag^{e com}^mⁱ^s^sⁱ^on^s^{(4) com}^mⁱ^s^sⁱ^on^pay^m^en^t^s^t^o⁽⁴⁾^ho^w^t^h^e^fund^p^a^y^s²¹⁰⁾
^://wikiⁱ^nve^st^m^e^nt^a^d^vi^c^e^o^r^r^e^sear^ch^o^r^w^h^o^f^acilitateⁱⁿ^an^y^dis^c^los^u^{re of}^f^ees^an^{d ex}^pen^s^es^th^{at m}^a^y^be^brok^ers^w^h^{o prov}ⁱ^d^eⁱ^nve^st^m^e^nt^a^d^vi^c^e^o^r^com^mⁱ^s^sⁱ^on^s^t^o^brok^ers^w^h^{o prov}ⁱ^d^{e i}ⁿ^v^e^s^t^m^eⁿ^t^Wou^l^{d requ}ⁱ^r^{e f}^uⁿ^d^s^t^o^di^s^c^l^o^s^e
^h^ttp^th^{e sale o}^f^th^{e f}^uⁿ^d^’^s^pay^a^bl^{e by}^s^h^areh^ol^ders^.^r^e^sear^ch^o^r^w^h^o^f^{acilitate th}^e^advⁱ^{ce or res}^earch^{or w}^h^o^th^{e am}^ouⁿ^t^an^{d s}^t^ru^ctu^r^{e of}
^s^h^ares^{; (5) pay}^m^en^ts^to^(S^{ec. 2(b))}^s^a^{le of}^th^{e f}^uⁿ^d^’^s^s^h^ares^;^f^{acilitate th}^{e sale o}^f^th^e^co^m^p^en^satioⁿ^p^a^id^to^th^{e f}^uⁿ^d^’^s
^an^y^ot^h^e^{r pers}^on^w^h^o^{(5) pay}^m^en^t^s^t^o^an^y^ot^h^e^r^f^uⁿ^d^’^s^s^h^ares^;^p^o^r^t^f^o^lⁱ^o^m^a^na^ge^m^e^nt^t^e^a^m^,^a^s
^f^{acilitates th}^{e sale o}^f^th^e^{SEC sh}^{all b}^y^r^u^{le r}^e^q^u^ir^e^p^e^r^s^oⁿ^{s w}^h^o^f^{acilitate th}^e^{(5) pay}^m^en^t^s^t^o^an^y^ot^h^e^r^w^e^{ll as th}^{e v}^a^lu^{e o}^f^th^eir
^f^uⁿ^d^’^s^s^h^ares^{; an}^{d (6)}^fund^{s to}^dⁱ^sc^lo^se^ho^w^s^a^{le of}^th^{e f}^uⁿ^d^’^s^s^h^ares^;^p^e^r^s^oⁿ^w^h^o^f^{acilitates th}^e^ho^l^dⁱ^{ngs o}^f^t^h^e^fund^{’s sha}^r^e^s^.
ⁱⁿ^f^o^r^m^atioⁿ^oⁿ^f^e^e^th^ey^com^p^en^s^a^te^an^d⁽⁶⁾ⁱⁿ^f^o^r^m^atioⁿ^oⁿ^s^a^{le of}^th^{e f}^uⁿ^d^’^s^s^h^ares^;^(S^{ec. 211)}
^dⁱ^sc^o^{unts fo}^r^w^h^ic^h^p^o^r^tf^o^lio^m^aⁿ^a^g^e^r^s^{, an}^d^di^s^c^ouⁿ^t^sⁱⁿ^f^r^on^t^-^en^{d f}^ees^an^d
ⁱⁿ^v^e^sto^r^{s m}^a^y^b^e^elig^ib^le,^t^h^e^o^w^ne^r^s^hi^p^o^f^fund^fo^r^w^hⁱ^c^{h i}^nve^st^o^r^{s m}^a^y^b^e⁽⁶⁾ⁱⁿ^f^o^r^m^atioⁿ^oⁿ^Rep^o^r^{ts f}^iled^w^ith^th^{e SEC}
ⁱⁿ^c^l^udⁱ^{ng t}^h^e^mⁱⁿⁱ^m^u^m^s^h^ares^by^s^u^ch^elig^ib^{le, in}^clu^dⁱⁿ^g^th^e^di^s^c^ouⁿ^t^sⁱⁿ^f^r^on^t^-^en^{d f}^ees^w^o^u^l^dⁱⁿ^clu^d^{e in}^f^o^r^m^atioⁿ^oⁿ
^p^u^r^c^ha^se^a^m^o^unt^sⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^aⁿ^d^miⁿⁱ^mu^{m r}^e^q^uⁱ^r^e^d^p^u^r^c^h^a^s^e^fo^r^w^hⁱ^c^{h i}^nve^st^o^r^{s m}^a^y^b^e^“^b^reak^poin^t^s^,^{” or v}^o^lu^m^e
^(break^poiⁿ^t^s⁾^requⁱ^r^{ed t}^o^th^{eir em}^ploy^ees^.^am^ouⁿ^t^s^(“^break^poiⁿ^t^s^”^).^elig^ib^{le, in}^clu^dⁱⁿ^g^th^e^dⁱ^sc^o^unt^{s fo}^r^w^hⁱ^c^{h i}^nve^st^o^r^s
^qu^alⁱ^f^y^f^o^{r di}^s^c^ouⁿ^t^s^.^{(Sec. 4)}^(S^{ec. 101)}^miⁿⁱ^mu^{m r}^e^q^uⁱ^r^e^d^p^u^r^c^h^a^s^e^m^a^y^{be el}ⁱ^gⁱ^b^l^e^{. (S}^{ec. 213)}
^(S^{ec. 101)}^am^ouⁿ^t^s^(break^poin^t^s⁾^.
^(S^{ec. 101)}^F^uⁿ^d^s^w^o^u^l^{d be requ}ⁱ^r^{ed t}^o
^dis^c^los^e^an^{d ex}^plain^th^eir
^p^o^r^tf^o^lio^tu^rⁿ^o^v^er^r^a^tio^.
^(S^{ec. 214)}

CRS-4
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^d^atory^{SEC sh}^{all r}^e^q^u^ir^{e th}^at^N^o^provⁱ^sⁱ^oⁿ^.^F^{ee di}^s^c^l^o^s^u^{re m}^u^s^t^be^N^o^provⁱ^sⁱ^oⁿ^.^Dⁱ^s^c^l^o^s^u^res^abou^t^operatⁱⁿ^g^cos^t^s
^s^ioⁿ^sⁱⁿ^f^e^e^qu^arterly^s^t^atem^en^tsⁱⁿ^clu^d^{ed in}^each^s^t^atem^en^t^an^{d tran}^s^action^cos^t^ratios^m^u^s^t
^lo^sur^e^s^dⁱ^sc^lo^se^tha^t^inve^sto^r^s^of^accouⁿ^t^{, an}^{d f}^e^e^{be di}^s^p^l^a^y^e^{d prom}ⁱⁿ^en^t^l^y^{, an}^{d al}^l
^h^a^v^e^been^ch^arg^e^{d f}^ees^,ⁱⁿ^f^o^r^m^atioⁿ^m^u^{st b}^e^f^ees^{, ch}^arg^e^s^,^an^{d ex}^pen^s^es^m^u^s^t
^an^d^w^h^er^{e ad}^d^itioⁿ^a^l^di^s^p^l^a^y^e^{d i}ⁿ^cl^os^{e prox}ⁱ^mⁱ^t^y^{be cl}^earl^y^defⁱⁿ^e^d.
ⁱⁿ^f^o^r^m^atioⁿ^oⁿ^f^{ees m}^a^y^to^th^{e v}^a^lu^{e o}^f^th^{e in}^v^e^sto^r^’^s^(S^{ec. 210)}
^b^e^fo^und^.^s^h^ares^.
^(S^{ec. 101)}^(S^{ec 101)}
^lo^sur^e^o^f^{SEC sh}^{all b}^y^r^u^{le r}^e^q^u^ir^e^B^r^o^k^er^{s sellin}^g^m^u^tu^al^N^o^provⁱ^sⁱ^oⁿ^.^Brok^ers^w^o^u^l^{d be requ}ⁱ^r^ed^Brok^ers^w^o^u^l^{d be requ}ⁱ^r^{ed t}^o
^an^d^di^s^c^l^o^s^u^{re by}^brok^ers^of^f^uⁿ^d^s^w^o^u^l^{d be requ}ⁱ^r^ed^to^dⁱ^sclo^{se in}^w^r^itin^g^to^dⁱ^sclo^{se in}^w^r^itin^g^th^{e am}^o^uⁿ^t
^m^p^en^satioⁿⁱⁿ^th^{e am}^ouⁿ^t^an^{d s}^o^u^r^{ce of}^to^dⁱ^sclo^{se to}^th^eir^th^{eir cu}^s^t^om^ers^th^{e am}^ouⁿ^t^an^{d s}^o^u^r^{ce of}^com^p^en^s^a^tion^th^ey
ⁱ^{ki/CRS-RL32157}^tu^{al f}^uⁿ^d^sales^s^a^les^f^ees^an^{d ch}^arg^e^s^,ⁱⁿ^cen^tiv^es^{, com}^mⁱ^s^sⁱ^on^s^,^cu^s^t^om^ers^th^{e am}^ouⁿ^t^of^an^{d n}^a^tu^{re of}^com^p^en^s^a^tion^th^ey^receiv^e^f^o^{r sellin}^g^receiv^e^f^o^{r sellin}^g^th^{e f}^uⁿ^d^.^Suc^h^dⁱ^sc^lo^sur^e^m^u^{st b}^e^m^a^d^e
^g/w^an^y^oth^e^{r ex}^pen^s^es^co^m^p^en^satioⁿ^to^b^e^m^u^tu^{al f}^uⁿ^d^s^,^an^{d an}^y^b^e^f^o^r^e^th^{e sale is co}ⁿ^c^lu^d^e^d^,^an^d
^s^.orⁱⁿ^cu^r^r^e^dⁱⁿ^th^{e sale o}^f^receiv^e^{d by}^th^{e brok}^er.^coⁿ^f^{licts o}^fⁱⁿ^ter^e^{st th}^at^m^a^yⁿ^o^{t be m}^a^{de ex}^clu^s^iv^elyⁱⁿ^a
^le^ak^m^u^t^u^a^l^fund^{s o}^r^m^uni^cⁱ^p^a^l^{(Sec. 2(a))}^aris^{e f}^r^om^s^u^ch^regⁱ^s^t^ration^s^t^atem^en^{t or}
^://wiki^secu^r^{ities, as w}^e^{ll as}^r^e^lated^coⁿ^f^{licts o}^fⁱⁿ^ter^e^st^com^p^en^s^a^tion^.^(S^{ec. 104)}^pros^pect^u^s^.^(S^{ec. 212)}
^h^ttp^betw^een^th^{e brok}^{er an}^d
^th^{e cu}^s^t^om^er.
^(S^{ec. 110)}
^C^approv^al^of^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^S^E^C^di^rect^{ed t}^o^defⁱⁿ^e^by^ru^l^e^al^l
^w^f^ees^an^d^s^p^ecifⁱ^{c ty}^pes^of^f^ees^an^d
^pen^s^es^ex^pen^s^es^t^h^at^m^a^y^{be born}^e^by
^f^uⁿ^d^s^h^areh^olders^{. No n}^e^w^f^e^e
^m^a^y^{be i}^m^pos^{ed on}^s^h^areh^ol^ders
^uⁿ^l^{ess th}^{e SEC d}^e^ter^mⁱⁿ^{es th}^at
^th^{e f}^{ee f}^a^irly^ref^l^ects^s^e^rv^ices
^p^r^o^v^id^ed^{, o}^r^th^{at th}^{e f}^{ee is in}^th^e
^sha^r^e^h^o^l^d^e^r^s^{’ b}^e^{st inte}^r^e^sts.
^(S^{ec. 210(e))}

CRS-5
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^p^e^a^l^o^f^Rule^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^R^e^peal^s^S^E^C^R^u^l^e^12b-^{1, w}^hⁱ^c^h
¹^allo^w^s^f^uⁿ^d^{s to}^ch^ar^g^e^m^a^r^k^etin^g
^an^{d di}^s^t^ri^bu^tⁱ^oⁿ^ex^pen^s^es^t^o^t^h^e
^s^h^areh^olders^{. Su}^ch^ex^pen^s^es
^w^o^u^l^{d i}ⁿ^s^t^{ead be pai}^d^ou^t^of^t^h^e
^m^aⁿ^a^g^e^m^eⁿ^t^f^{ee receiv}^e^{d by}^th^e
ⁱ^nve^st^m^e^nt^a^d^vi^se^r^.^T^h^e
^ad^vⁱ^ser^’^{s ex}^p^eⁿ^d^itu^r^e^{s r}^e^lated^to
^sa^le^o^f^fund^sha^r^e^s^m^u^{st b}^e
^di^s^c^l^o^s^e^{d t}^o^t^h^{e f}^uⁿ^d^’^s^{board of}
^directors^an^{d accou}ⁿ^t^{ed f}^o^{r in}^th^e
^f^uⁿ^d^’^s^pu^blⁱ^s^h^e^{d ex}^pen^s^{e rat}ⁱ^o^.
ⁱ^{ki/CRS-RL32157}^T^h^{e board m}^a^y^prohⁱ^bⁱ^t^t^h^e^advⁱ^s^e^{r f}^r^omⁱⁿ^cu^rrin^g
^g/w^dis^t^ribu^tion^ex^pen^s^es^th^{at are n}^o^t
^s^.orⁱⁿ^th^{e sh}^ar^eh^o^l^d^e^r^s^’ⁱⁿ^ter^e^st.
^le^ak^(S^{ec. 310)}
^://wiki^o^h^ib^itioⁿ^o^f^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^A^s^s^e^t^-^bas^e^{d di}^s^t^ri^bu^tⁱ^oⁿ^f^ees^(t^o
^h^ttp^t-b^a^se^d^{be def}ⁱⁿ^e^{d by}^t^h^{e S}^E^C⁾^are
^t^ri^bu^tⁱ^oⁿ^f^ees^prohⁱ^bⁱ^t^e^{d. (S}^{ec. 310)}
^du^ctⁱ^oⁿ^of^{SEC sh}^{all co}ⁿ^s^id^er^w^a^y^s^No^p^r^o^v^isioⁿ^.^{SEC sh}^{all co}ⁿ^s^id^er^w^a^y^s^o^f^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.
^lo^sur^e^b^u^r^d^eⁿ^of^redu^ciⁿ^g^cos^t^s^redu^cin^g^cos^t^s^as^s^o^ciated
^sm^{all f}^uⁿ^d^s^as^s^o^{ciated w}^ith^dis^c^los^u^re^w^ith^dⁱ^sclo^su^r^e^to^sm^all
^to^sm^{all f}^uⁿ^d^{s, co}ⁿ^s^isten^t^f^uⁿ^d^{s, co}ⁿ^s^isten^t^w^ith^p^u^b^lic
^w^ith^p^u^b^{lic in}^ter^e^st.ⁱⁿ^t^e^res^t^{. (S}^{ec. 101)}
^(S^{ec. 101)}
ⁱⁿ^itioⁿ^o^fⁿ^o^-^SEC^{directed to m}^a^k^e^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^{SEC d}ⁱ^r^ected^to^m^a^k^e^r^u^les^N^o^provⁱ^sⁱ^oⁿ^.

^d^fund^r^u^l^e^{s d}^e^fiⁿⁱ^{ng “no}^-^l^o^a^d^”^defⁱⁿⁱⁿ^g^“ⁿ^o-^{load” m}^u^tu^al
^m^u^tu^{al f}^uⁿ^d^s^an^d^f^uⁿ^d^s^an^{d requ}ⁱ^rⁱⁿ^g
^r^e^q^u^irⁱⁿ^g^dⁱ^sclo^su^r^e^to^dⁱ^sc^lo^sur^e^to^p^r^e^v^eⁿ^t
^prev^en^tⁱⁿ^v^e^s^t^ors^f^r^omⁱⁿ^v^e^s^t^ors^f^r^om^beiⁿ^g^mⁱ^s^l^ed
^bein^g^mⁱ^s^l^{ed by}^th^{e u}^s^{e of}^by^th^{e u}^s^{e of}^s^u^ch
^su^ch^ter^mⁱⁿ^o^l^o^g^y^.^ter^mⁱⁿ^o^l^o^g^y^.
^(S^{ec. 106)}^(S^{ec. 103)}

CRS-6
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^So^f^t^Do^{llar, Rev}^eⁿ^u^e^Sh^arin^g^,^an^d^Direct^ed^Bro^kerag^{e A}^rran^g^e^men^t^s.
^lo^sur^e^o^f^,^o^r^I^nve^st^m^e^nt^a^d^vi^se^r^s^t^o^So^f^t^d^o^llar^p^a^y^m^en^ts^Cer^t^ain^so^f^t^d^o^llar^p^a^y^m^en^ts^I^nve^st^m^e^nt^a^d^vi^se^r^s^t^o^A^m^en^d^s^statu^t^{e to}^p^r^o^h^ib^{it so}^f^t
ⁱ^ctioⁿ^s^u^p^oⁿ^,^mu^t^u^a^l^f^uⁿ^d^s^mu^s^t^r^e^p^o^r^t^w^o^u^l^d^b^eⁱⁿ^clu^d^edⁱⁿ^th^e^w^o^u^l^d^b^eⁱⁿ^clu^d^edⁱⁿ^th^e^regⁱ^s^t^{ered m}^u^tu^{al f}^uⁿ^d^s^d^o^l^l^a^r^,^r^e^ve^nue^sha^rⁱ^ng,^aⁿ^d
^f^t^d^o^llar^,^a^nnua^l^l^y^t^o^t^h^e^fund^’s^ag^g^r^eg^{ate brok}^erag^e^ag^g^r^eg^{ate operatin}^g^w^o^u^l^{d be requ}ⁱ^r^{ed t}^o^report^{directed brok}^erag^{e arran}^g^e^m^eⁿ^t^s^,
^nue^sha^rⁱ^ng,^{board on}^{(1) pay}^m^en^t^s^c^o^m^mⁱ^ssioⁿ^dⁱ^sc^lo^sur^e^ex^pen^s^es^dis^c^los^u^res^a^nnua^l^l^y^t^o^t^h^e^fund^{’s b}^o^a^r^d^as^defⁱⁿ^e^{d. T}^h^{e S}^E^Cⁱ^s
^{d directed}^m^a^{de t}^o^prom^ot^{e s}^a^l^e^of^requⁱ^r^{ed by}^S^{ec. 2(b).}^m^aⁿ^d^at^{ed by}^S^{ec. 101.}^r^e^g^a^r^dⁱⁿ^g^{all p}^a^y^m^en^ts^au^th^{orized to ref}ⁱⁿ^e^th^{e s}^t^atu^t^ory
^erag^e^th^{e f}^uⁿ^d^’^s^s^h^ares^receiv^e^{d an}^{d s}^e^rv^ices^d^e^fⁱⁿ^itioⁿ^o^f^th^{ese ter}^m^{s b}^y^r^u^le,
^a^nge^m^e^nt^s⁽^“^r^e^ve^nue^sha^rⁱ^ng”⁾^,⁽²⁾^provⁱ^d^{ed (i}ⁿ^c^l^u^diⁿ^g^o^r^o^t^h^e^r^w^{ise tailo}^r^th^e
^s^e^rv^ices^{or pay}^m^en^ts^to^res^earch^{). A}^s^u^m^m^a^ry^of^p^r^o^s^cr^ip^tioⁿ^sⁱⁿ^th^{is sectio}ⁿ^,^if^it
^t^h^{e f}^uⁿ^d^by^{a brok}^{er i}ⁿ^t^h^es^{e report}^s^w^o^u^l^{d be}^{is in}^th^{e in}^ter^e^{st o}^f^f^uⁿ^d
^ex^ch^an^g^e^f^o^{r brok}^erag^eⁱⁿ^clu^d^edⁱⁿ^th^{e f}^uⁿ^d^’^s^s^h^areh^ol^ders^{, or i}^f^s^u^ch
ⁱ^{ki/CRS-RL32157}^b^u^sine^{ss (}^“^dⁱ^r^e^c^t^e^d^brok^erag^{e”), an}^{d (3)}^a^nnua^l^r^e^p^o^r^t^t^o^s^h^areh^olders^.^m^o^dⁱ^fⁱ^catioⁿ^s^r^e^d^u^{ce co}ⁿ^f^{licts o}^fⁱⁿ^teres^t^{or in}^creas^{e tran}^s^p^aren^cy
^g/w^res^earch^s^e^rv^ices^obtain^e^d^(S^{ec. 102)}^an^d^co^m^p^etitioⁿⁱⁿ^tr^ad^e
^s^.or^by^th^{e adv}ⁱ^s^e^{r f}^r^om^a^ex^ecu^tion^s^.
^le^ak^brok^{er in}^ex^ch^an^g^e^f^o^r^(S^{ec. 311)}
^://wiki^secu^r^{ities tr}^an^sactioⁿ^s⁽^“^so^f^t^d^o^llar
^h^ttp^a^r^r^a^nge^m^e^nt^s”⁾^.^A
^sum^m^a^r^y^o^f^t^hⁱ^s^a^nnua^l
^r^e^p^o^r^{t m}^u^{st b}^eⁱⁿ^clu^d^edⁱⁿ
^t^h^e^a^nnua^l^r^e^p^o^r^t^t^o
^s^h^areh^olders^.
^(S^{ec. 102)}
^du^ci^ary^du^t^y^of^Dir^e^c^t^o^r^{s sha}^{ll ha}^ve^a^No^p^r^o^v^isioⁿ^.^{SEC sh}^{all issu}^{e r}^e^g^u^l^atioⁿ^s^N^o^p^r^o^vⁱ^sⁱ^o^n.^N^o^p^r^o^vⁱ^sⁱ^o^n:^suc^h^a^r^r^a^nge^m^e^nt^s
^t^u^a^l^fund^fⁱ^du^ciary^du^ty^{to rev}ⁱ^ew^es^tablis^hⁱⁿ^g^{a f}ⁱ^du^ciary^du^ty^w^o^u^l^{d be proh}ⁱ^bⁱ^t^e^{d by}^S^{ec. 311.}

^ors^suc^h^a^r^r^a^nge^m^e^nt^{s t}^o^f^o^{r di}^rect^ors^t^o^dem^oⁿ^s^t^r^at^e
^r^dⁱ^{ng so}^ft^en^s^u^{re th}^{at th}^ey^com^p^ly^t^h^a^t^a^l^l^m^a^na^ge^m^e^nt^,
^l^l^a^r^,^r^e^ve^nue^w^ith^law^an^d^r^e^g^u^l^atioⁿ^m^a^r^k^e^tⁱ^ng,^aⁿ^dⁱ^nve^st^m^e^nt
^arin^g^,^an^d^an^{d are in}^th^{e bes}^t^advⁱ^s^o^ry^f^ees^{paid by}^th^e
ⁱⁿ^ter^e^{sts o}^f^f^uⁿ^d^f^uⁿ^d^{are reas}^on^{able an}^{d in}
^erag^e^s^h^areh^olders^.^th^{e b}^e^{st in}^ter^e^{sts o}^f^f^uⁿ^d
^a^nge^m^e^nt^s^(S^{ec. 102)}^s^h^areh^olders^.
^(S^{ec. 101(g}⁾⁾

CRS-7
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^eepin^g^{SEC sh}^{all b}^y^r^u^{le r}^e^q^u^ir^e^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^:^s^u^ch^arran^g^e^m^eⁿ^t^s
^irem^en^ts^th^{at all s}^u^ch^arran^g^e^m^eⁿ^t^s^w^o^u^l^{d be proh}ⁱ^bⁱ^t^e^{d (s}^{ee abov}^e).
^r^dⁱ^{ng so}^ftⁱ^nvo^l^vⁱ^{ng r}^e^se^a^r^c^h^se^r^vⁱ^c^e
^l^l^a^r^,^r^e^ve^nue^b^e^d^o^c^u^m^en^ted^b^y^w^r^itten
^arin^g^,^an^d^con^t^racts^th^{at des}^c^{ribe th}^e
^na^t^u^r^e^aⁿ^d^va^l^u^e^o^f
^erag^e^s^e^rv^ices^prov^ided.
^a^nge^m^e^nt^s^(S^{ec. 102)}
^M^u^tua^l^{Fund Gov}^e^rⁿ^aⁿ^c^e^.
^depen^d^en^t^A^t^leas^{t 2/3 of}^{a m}^u^tu^al^A^t^leas^{t 75% of}^{a m}^u^tu^al^A^t^leas^{t 75% of}^{a m}^u^tu^al^A^t^leas^{t 75% of}^{a m}^u^tu^al^A^t^leas^{t 75% of}^{a m}^u^tu^{al f}^uⁿ^d^’^s
ⁱ^{ki/CRS-RL32157}^an^d^airm^en^f^uⁿ^d^’^s^di^rect^ors^m^u^s^t^beⁱⁿ^depen^d^en^t^(v^ers^u^s^40%^f^uⁿ^d^’^s^di^rect^ors^m^u^s^t^beⁱⁿ^d^e^p^eⁿ^d^en^{t, in}^clu^dⁱⁿ^g^f^uⁿ^d^’^s^di^rect^ors^m^u^s^t^beⁱⁿ^depen^d^en^{t. T}^h^{e ch}^airm^an^f^uⁿ^d^’^s^di^rect^ors^m^u^s^t^beⁱⁿ^depen^d^en^{t. T}^h^{e ch}^airm^an^di^rect^ors^m^u^s^t^{be i}ⁿ^depen^d^en^t^,ⁱⁿ^clu^dⁱⁿ^g^th^{e ch}^airm^an^of^th^e
^g/w^uⁿ^d^{er cu}^rren^{t law}⁾^.^th^{e ch}^airm^an^of^th^e^of^t^h^{e board m}^u^s^t^be^of^t^h^{e board m}^u^s^t^be^board.
^s^.or^(S^{ec. 103(a))}^board.ⁱⁿ^depen^d^en^t^.ⁱⁿ^depen^d^en^t^.
^le^ak^(S^{ec. 101(e))}^(S^{ec. 201)}^In^t^e^res^t^{ed pers}^on^s^w^h^{o s}^e^rv^{e as}
^In^t^e^res^t^{ed pers}^on^s^w^h^o^b^o^a^r^d^me^mb^e^r^s^mu^s^t^b^e
^://wiki^s^e^rv^{e as}^{board m}^e^m^b^ers^approv^{ed by}^s^h^areh^ol^{der v}^o^t^e^at
^h^ttp^m^u^s^t^{be approv}^{ed by}^leas^{t ev}^ery^fⁱ^v^e^y^ears^.
^s^h^areh^{older v}^o^{te at leas}^t^(S^{ec. 110)}
^ev^ery^fⁱ^v^e^y^ears^.
^{(Sec. 3(a))}
^o^h^ib^itioⁿ^oⁿ^No^p^r^o^v^isioⁿ^.^No^actioⁿ^tak^eⁿ^b^y^th^e^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.
ⁿ^s^r^e^q^u^irⁱⁿ^g^{board m}^a^y^requⁱ^r^{e t}^h^e
^vo^t^e^o^f^no^n-^vo^t^e^o^f^a^no^n-
^d^en^tⁱⁿ^depen^d^en^t^di^rect^or.
^ors^{(Sec. 3(b))}
^r^mⁱⁿ^atioⁿ^o^f^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^{SEC is d}ⁱ^r^ected^to^m^a^k^e^{a r}^u^le
^st^m^e^nt^f^acilitatin^g^th^{e ter}^mⁱⁿ^atioⁿ^o^f^an
ⁱ^s^e^rⁱ^nve^st^m^e^nt^a^d^vi^se^r^b^y^a^fund^’s
ⁱⁿ^depen^d^en^t^di^rect^ors^,^wⁱ^t^h^ou^t
^und^ue^e^x^p^o^s^ur^e^t^o^fi^na^ncⁱ^a^l^o^r
^litig^atioⁿ^rⁱ^sk^.
^(S^{ec. 114)}

CRS-8
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^mⁱ^na^tⁱ^o^{n o}^f^No^p^r^o^v^isioⁿ^.^A^co^m^m^{ittee m}^a^d^e^u^p^No^p^r^o^v^isioⁿ^.^A^co^m^m^{ittee m}^a^d^e^u^p^A^com^m^{ittee m}^a^{de u}^p^en^tirely^of
^ors^en^tⁱ^r^el^y^ofⁱⁿ^depen^d^en^t^en^tⁱ^r^el^y^ofⁱⁿ^depen^d^en^tⁱⁿ^depen^d^en^{t directors}^s^h^{all s}^e^lect
^directors^s^h^{all s}^e^lect^directors^s^h^{all s}^e^lect^pers^on^s^t^o^{be n}^o^mⁱⁿ^a^t^e^{d t}^o^t^h^e
^pers^on^s^t^o^{be n}^o^mⁱⁿ^a^t^e^d^pers^on^s^t^o^{be n}^o^mⁱⁿ^a^t^e^{d t}^o^{board, adopt}^qu^alⁱ^fⁱ^catⁱ^oⁿ
^t^o^t^h^{e board an}^{d adopt}^t^h^{e board an}^{d adopt}^s^t^an^dards^,^an^{d s}^e^{t com}^p^en^s^a^tion
^q^u^alif^icatioⁿ^stan^d^a^r^d^s^q^u^alif^icatioⁿ^stan^d^a^r^d^{s f}^o^r^f^o^{r di}^rect^ors^.
^f^o^{r di}^rect^ors^.^di^rect^ors^.^(S^{ec. 110)}
^{(Sec. 3)}^(S^{ec. 201)}
ⁱⁿ^itioⁿ^o^f^A^m^e^m^b^{er of}^{a clas}^s^of^In^clu^d^es^an^y^pers^on^w^ith^A^m^e^m^b^{er of}^{a clas}^s^of^In^clu^d^es^an^y^pers^on^w^ith^a^In^clu^d^es^an^y^pers^on^w^ith^a
^t^eres^ted^pers^on^s^w^h^om^t^h^{e S}^E^C^by^a^m^a^te^rⁱ^a^l^b^u^sine^{ss o}^r^pers^on^s^w^h^om^t^h^{e S}^E^C^by^m^a^te^rⁱ^a^l^b^u^sine^{ss o}^r^fa^m^ily^m^a^te^rⁱ^a^l^b^u^sine^{ss o}^r^fa^m^ily
^on^{” (i.e., n}^o^t^r^u^{le d}^eem^{s to}^b^e^uⁿ^lik^ely^f^a^m^ily^r^e^latioⁿ^s^hⁱ^p^w^ith^,^r^u^{le d}^eem^{s to}^b^e^uⁿ^lik^ely^to^r^e^latioⁿ^s^hⁱ^p^w^ith^{, o}^r^w^h^o^r^e^latioⁿ^s^hⁱ^p^w^ith^{, o}^r^w^h^o^w^a^s
ⁱ^{ki/CRS-RL32157}^d^en^t⁾^{to ex}^ercis^e^an^appropriate^deg^r^{ee of}ⁱⁿ^depen^d^en^ce^{or w}^h^{o w}^a^s^em^pl^oy^{ed by}^a^fund^{’s i}^nve^st^m^e^nt^ex^ercis^e^an^appropriate^deg^r^{ee of}ⁱⁿ^depen^d^en^ce^w^a^s^em^pl^oy^{ed by}^{a f}^uⁿ^d^’^sⁱ^nve^st^m^e^nt^a^d^vi^se^r^,^e^m^p^l^o^y^e^d^b^y^a^fund^{’s i}^nve^st^m^e^nt^ad^vⁱ^ser^,^p^rⁱⁿ^cip^a^{l u}ⁿ^d^er^w^r^iter^,^o^r
^g/w^becau^s^e^of^{a bu}^sⁱⁿ^e^s^s^,^a^d^vi^se^r^,^und^e^r^w^rⁱ^t^e^r^,^o^r^becau^s^e^of^{a bu}^sⁱⁿ^e^s^s^,^uⁿ^d^e^r^wrⁱ^t^e^r^,^o^r^wh^o^s^e^r^v^e^d^w^h^{o s}^e^rv^{ed as}^an^of^fⁱ^{cer or}
^s^.or^prof^es^sⁱ^on^al^{, or f}^a^mⁱ^l^y^w^h^{o s}^e^rv^{ed as}^an^of^fⁱ^cer^prof^es^sⁱ^on^al^{, or f}^a^mⁱ^l^y^as^an^of^fⁱ^{cer or director of}^a^{director of}^{a “}^s^igⁿⁱ^fⁱ^can^{t s}^e^rv^ice
^le^ak^r^e^latioⁿ^s^hⁱ^p^w^ith^f^uⁿ^d^{or di}^rect^{or of}^a^r^e^latioⁿ^s^hⁱ^p^w^ith^f^uⁿ^d^“^s^igⁿⁱ^fⁱ^can^{t ser}^v^ice^provⁱ^d^{er” (t}^{o be def}ⁱⁿ^e^{d by}^t^h^e
^://wiki^m^a^na^ge^m^e^nt^o^rⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^.^“^s^igⁿⁱ^fⁱ^can^{t ser}^v^ice^provⁱ^d^{er” (t}^{o be def}ⁱⁿ^e^d^m^a^na^ge^m^e^nt^o^rⁱ^nve^st^m^e^nt^advⁱ^s^e^rs^.^provⁱ^d^{er” (t}^{o be def}ⁱⁿ^e^{d by}^th^{e SEC)}^w^ithⁱⁿ^th^{e last 1}⁰^SEC)^w^ithⁱⁿ^th^{e last 1}⁰^y^ear^s.^(S^{ec. 110)}

^h^ttp^(S^{ec. 103(b))}^b^y^th^{e SEC)}^w^ithⁱⁿ^th^e^(S^{ec. 101(f}⁾⁾^y^ears^.^(If^on^{e w}^a^s^m^e^rely
^l^a^s^t^{10 y}^ears^.^(If^on^{e w}^a^s^em^ploy^{ed by}^th^{e s}ⁱ^gⁿⁱ^fⁱ^can^t
^m^e^rel^y^em^pl^oy^{ed by}^t^h^e^s^e^rv^{ice prov}^{ider, th}^{e term}
^signific^aⁿ^{t se}^r^v^ic^e^o^f^r^e^strⁱ^ctioⁿ^{is f}ⁱ^v^e^y^ear^s.)
^p^r^o^v^id^er^{, th}^{e ter}^m^o^f^(S^{ec. 201)}
^r^e^strⁱ^ctioⁿ^{is f}ⁱ^v^e^y^ear^s.)
^{(Sec. 3)}

CRS-9
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^ciary^du^ties^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^Dir^{ects th}^{e SEC to}^m^a^k^e^{Board of}^di^rect^ors^s^h^al^l^Dir^{ects th}^{e SEC to}^m^a^k^e^r^u^les
ⁱⁿ^depen^d^en^t^r^u^{les sp}^ecif^yⁱⁿ^g^th^{at th}^e^h^a^v^e^{a f}ⁱ^du^ciary^du^ty^to^clarif^yⁱⁿ^g^th^{e f}ⁱ^du^ciary^du^ties^of
^an^d^{board of}^di^rect^ors^s^h^al^l^h^a^v^e^en^su^r^e^th^{at so}^f^t^d^o^llar^,ⁱⁿ^depen^d^en^t^di^rect^ors^,^w^hⁱ^c^h
^st^m^e^nt^{a f}ⁱ^du^ciary^du^ty^to^{directed brok}^erag^{e, an}^d^s^h^{all in}^clu^d^{e (1) ev}^alu^a^tion^of
ⁱ^s^e^rs^dem^oⁿ^s^{trate th}^{at all}^r^e^ve^nue^sha^rⁱⁿ^g^th^{e relation}^s^hⁱ^{p betw}^een^f^ees^an^d
ⁿ^e^g^o^tiated^f^{ees ar}^e^a^r^r^a^nge^m^e^nt^{s a}^d^he^r^e^t^o^t^h^e^actu^a^{l co}^{sts, th}^{e q}^u^ality^o^f
^reas^on^{able an}^{d in}^th^e^f^uⁿ^d^’^s^s^t^{ated policies}^an^d^m^a^na^ge^m^e^nt^aⁿ^d^dⁱ^sc^l^o^sur^e^s,^t^h^e
^s^h^areh^olders^’ⁱⁿ^teres^t^{, an}^{d to}^{are in}^th^{e s}^h^areh^olders^’^bes^t^{size an}^d^su^itab^ility^o^f^th^{e f}^uⁿ^d^’^s
^dⁱ^sc^lo^se^aⁿ^y^b^u^sine^{ss o}^rⁱⁿ^ter^e^sts.^port^f^olⁱ^o^{, cos}^t^s^an^{d ben}^e^fⁱ^t^s^of
^prof^es^sⁱ^on^al^lⁱⁿ^k^s^bet^w^een^(S^{ec. 102)}^m^a^rk^etⁱⁿ^g^pl^an^s^,^an^{d ot}^h^e^r
^di^rect^ors^an^{d prov}ⁱ^d^ers^of^m^a^tter^s^{, an}^d⁽²⁾^im^p^l^em^en^tatioⁿ
^a^d^vi^so^r^y^,ⁱ^nve^st^m^e^nt^,^o^r^an^d^m^oⁿ^ito^rⁱⁿ^g^o^f^p^o^{licies to}
ⁱ^{ki/CRS-RL32157}^o^t^h^e^r^ser^v^{ices to}^th^{e f}^uⁿ^d^.^(S^{ec. 101)}^en^s^u^{re com}^p^lian^{ce w}^ith^secu^r^{ities law}^s^{, an}^d^p^o^{licies w}^ith
^g/w^res^p^{ect to predatory}^tradin^g
^s^.or^practices^.
^le^ak^(S^{ec. 113)}
^://wiki^Fo^rⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^,
^h^ttp^fⁱ^d^u^ciar^y^d^u^ty^sh^{all in}^clu^d^e
^s^u^ppl^yⁱⁿ^gⁱⁿ^depen^d^en^t^di^rect^ors
^w^ith^m^a^terⁱ^{al in}^f^o^r^m^atioⁿ^an^d
^m^a^y^r^e^q^u^ir^{e r}^e^f^e^r^eⁿ^{ce to}^th^e
^a^d^vise^r^’^{s a}^c^t^ua^{l c}^o^{sts w}^ith
^res^p^{ect to com}^p^en^s^a^tion^receiv^e^d
^fr^o^m^t^h^e^fund^.
^(S^{ec. 114)}

CRS-10
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^d^{it co}^m^m^ittee^A^m^u^t^u^a^l^fund^{’s b}^o^a^r^d^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^A^u^d^{it co}^m^m^{ittees w}^o^u^l^d^T^h^{e au}^{dit com}^m^ittees^w^o^u^l^d
^m^p^o^s^itioⁿ^an^d^s^h^{all in}^clu^d^{e an}^au^dit^coⁿ^s^{ist en}^tir^ely^o^f^coⁿ^s^{ist en}^tir^ely^o^fⁱⁿ^d^e^p^eⁿ^d^en^t
^oⁿ^sib^ilities^com^m^{ittee, m}^a^{de u}^pⁱⁿ^depen^d^en^t^di^rect^ors^,^an^d^di^rect^ors^,^an^{d w}^o^u^l^{d be}
^en^tⁱ^r^el^y^ofⁱⁿ^depen^d^en^t^w^o^u^l^{d be res}^pon^sⁱ^bl^{e f}^o^r^res^pon^sⁱ^bl^{e f}^o^{r h}ⁱ^riⁿ^g^,
^di^rect^ors^,^w^hⁱ^c^h^s^h^al^l^be^hi^rⁱ^ng,^c^o^m^p^eⁿ^sa^tⁱ^ng,^aⁿ^d^com^p^en^s^a^tin^g^,^an^{d ov}^ers^eein^g
^res^pon^sⁱ^bl^{e f}^o^{r s}^e^l^ectⁱ^oⁿ^,^ov^ers^eein^g^ou^ts^{ide au}^ditors^.^th^{e f}^uⁿ^d^’^s^o^u^tsid^{e au}^d^ito^r^.
^com^p^en^s^a^tion^,^an^d^T^h^{e au}^{dit com}^m^{ittee w}^ill^Selectioⁿ^o^f^an^au^d^ito^r^w^o^u^l^d^b^e
^o^v^e^r^si^ght^o^f^t^h^e^fund^’s^als^o^es^tablis^h^procedu^r^es^su^b^j^{ect to}^r^a^tif^icatioⁿ^b^y
ⁱⁿ^d^e^p^eⁿ^d^en^{t au}^d^ito^r^,^an^d^f^o^{r receiv}ⁱⁿ^g^an^d^s^h^areh^{older v}^o^{te. T}^h^{e au}^dit
^f^o^{r procedu}^r^es^f^o^r^en^cou^r^agⁱⁿ^g^com^p^lain^ts^co^m^m^{ittee w}^{ill also}^estab^lish
^m^oⁿ^ito^rⁱⁿ^g^co^m^p^lain^ts^ab^o^u^{t au}^d^itin^g^an^d^procedu^r^es^f^o^{r receiv}ⁱⁿ^g^an^d
^f^r^omⁱⁿ^v^e^s^t^ors^an^{d f}^uⁿ^d^accouⁿ^tin^g^m^a^tters^.^en^cou^r^agⁱⁿ^g^com^p^lain^ts^abou^t
ⁱ^{ki/CRS-RL32157}^em^ploy^ees^reg^a^rdin^g^qu^es^tion^a^{ble accou}ⁿ^tin^g^(S^{ec. 202)}^au^ditin^g^an^{d accou}ⁿ^tin^g^m^a^tters^.^(S^{ec. 115)}
^g/w^an^{d au}^ditin^g^practices^.
^s^.or^(S^{ec. 104)}
^le^ak
^://wiki^aⁿ^c^{ial ex}^p^e^r^t^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^Each^m^u^tu^{al f}^uⁿ^d^b^o^a^r^d^s^h^{all in}^clu^d^{e a f}ⁱⁿ^aⁿ^c^ial^N^o^provⁱ^sⁱ^oⁿ^.
^h^ttp^ex^pert^{, t}^o^{be def}ⁱⁿ^e^{d by}^t^h^e
^SE^C.
^(S^{ec. 201)}
^em^p^tioⁿ^f^r^o^m^SEC^m^a^y^ex^em^{pt m}^u^tu^al^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^S^E^C^m^a^y^ex^em^pt^m^u^t^u^al^f^uⁿ^d
^p^er^soⁿ^f^uⁿ^d^di^rect^ors^f^r^om^t^h^e^directors^f^r^om^th^{e requ}^irem^en^t
^g^r^e^q^u^ir^em^en^{t th}^{at th}^ey^b^e^th^{at th}^ey^b^e^p^h^y^s^ically^p^r^esen^{t to}
^irem^en^ts^ph^y^s^ically^pres^en^{t to cas}^t^cas^{t a v}^o^{te, if}^th^{eir pres}^en^{ce is}
^{a v}^o^{te, if}^th^{eir pres}^en^{ce is}^im^practical.
^im^p^r^{actical, an}^d^if^th^is^(S^{ec. 115)}

^ex^em^p^tioⁿ^{is co}ⁿ^s^isten^t
^w^ith^th^{e p}^u^b^{lic in}^ter^e^st.
^(S^{ec. 108)}

CRS-11
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^I^f^an^{SEC in}^sp^ectioⁿ^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^Sigⁿⁱ^fⁱ^can^{t d}^e^fⁱ^cien^{cies in}^a^N^o^provⁱ^sⁱ^oⁿ^.
^a^t^o^r^y^dis^c^ov^ers^defⁱ^cien^ciesⁱⁿ^a^fund^o^rⁱ^t^s^a^d^vi^se^r^s^aⁿ^d
ⁱ^cien^cies^fund^{’s o}^p^e^r^a^tⁱ^o^ns,^fund^und^e^r^w^rⁱ^t^e^r^s^fo^und^b^y^SE^C
^m^a^na^ge^m^e^nt^m^u^stⁱⁿ^fo^r^m^insp^e^c^t^o^r^{s m}^u^{st b}^e
^t^h^{e board of}^di^rect^ors^.^dⁱ^sclo^sed^to^th^{e f}^uⁿ^d^’^s
^(S^{ec. 107)}^{board. T}^h^{e 10 m}^o^s^t
^com^m^oⁿ^defⁱ^cien^ciesⁱⁿ
^m^u^t^u^a^l^fund^{s w}^o^ul^d^b^e
^m^a^d^e^p^u^b^lⁱ^c^a^nnua^l^l^y^b^y
^th^{e SEC.}
^(S^{ec. 203)}
ⁱ^{ki/CRS-RL32157}^sⁱ^der^sactioⁿ^sⁱⁿ^Sh^o^r^t-^ter^m^tr^an^sactioⁿ^sⁱⁿ^f^uⁿ^d^s^h^ares^byⁱⁿ^sⁱ^ders^,^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^S^h^{are pu}^rch^a^s^e^s^by^s^eⁿⁱ^or^ex^ecu^tiv^{e of}^fⁱ^cers^of^m^u^tu^al^Sh^o^r^t-^ter^m^tr^an^sactioⁿ^s^b^y^f^uⁿ^dⁱⁿ^sid^e^r^s^{, af}^f^{iliates, ad}^vⁱ^ser^s^{, o}^r
^g/wⁿ^d^s^h^ares^a^d^vi^se^r^s^,^o^r^und^e^r^w^rⁱ^t^e^r^s^fund^{s m}^u^{st b}^e^dⁱ^sc^lo^se^d^aⁿ^d^und^e^r^w^rⁱ^t^e^r^s^w^o^ul^d^b^e
^s^.or^proh^ibited.^s^h^ares^m^u^s^t^{be h}^e^{ld at leas}^t^p^r^o^h^ib^ited^.^T^h^{e p}^r^o^h^ib^itioⁿ
^le^ak^(S^{ec. 203)}^si^{x m}^o^nt^hs.^ex^clu^d^es^m^oⁿ^e^y^m^a^rk^{et f}^uⁿ^d^s^.
^://wiki^(S^{ec. 307)}^T^h^{e S}^E^C^w^o^u^l^{d def}ⁱⁿ^e^s^h^ort^-^ter^m^tr^adⁱⁿ^g^.
^h^ttp^(S^{ec. 314)}

CRS-12
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^tif^icatioⁿ^o^f^In^depen^d^en^t^di^rect^ors^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^{Board ch}^ai^rm^an^w^o^u^l^{d be}^Fund^a^d^vi^se^r^s^w^o^ul^d^b^e^r^e^q^uⁱ^r^e^d
^ncⁱ^a^l^sh^{all cer}^tif^yⁱⁿ^dⁱ^sclo^su^r^e^r^e^q^u^ir^ed^to^cer^tif^y^th^e^to^cer^tif^y^th^{at n}^e^{t asset v}^a^lu^{es o}^f
^en^ts^an^d/or^docu^m^en^ts^th^{at procedu}^r^es^accu^racy^of^dis^c^los^u^re^f^uⁿ^d^s^h^ares^w^e^{re calcu}^lated
ⁱ^oⁿ^a^l^{are in}^{place to ov}^ers^{ee th}^e^docu^m^en^ts^{, an}^{d th}^at^ap^p^r^o^p^r^iately^{, th}^{at d}ⁱ^f^f^e^r^eⁿ^t
^r^es^settin^g^o^fⁿ^e^{t asset v}^a^lu^es,^procedu^r^es^w^e^{re in}^{place to}^clas^s^e^s^of^s^h^ares^(if^of^f^e^{red) are}
^t^h^{e f}^l^ow^of^f^uⁿ^d^sⁱⁿ^an^d^ov^ers^{ee th}^{e s}^e^ttin^g^ofⁿ^e^tⁱⁿ^sh^ar^eh^o^l^d^e^r^s^’ⁱⁿ^ter^e^{st, th}^at
^o^u^{t o}^f^th^{e m}^u^tu^{al f}^uⁿ^d^{, th}^e^{asset v}^a^lu^{es, th}^{e f}^l^o^w^o^f^p^o^r^tf^o^lioⁱⁿ^f^o^r^m^atioⁿ^{is n}^o^t
^provⁱ^sⁱ^oⁿ^of^di^s^c^ouⁿ^t^s^t^o^f^uⁿ^d^sⁱⁿ^an^{d ou}^t^of^t^h^eⁱ^m^properl^y^di^s^c^l^o^s^e^{d, t}^h^at^t^h^e
^elig^ib^{le in}^v^e^sto^r^{s, th}^at^m^u^tu^{al f}^uⁿ^d^{, th}^{e p}^r^o^v^isioⁿⁱⁿ^depen^d^en^t^di^rect^ors^h^a^v^e
^dⁱ^ffe^r^e^{nt c}^l^a^sse^{s o}^f^m^u^tua^l^o^f^dⁱ^sco^uⁿ^t^{s to}^elig^ib^le^revⁱ^ew^{ed th}^{e com}^p^en^s^a^tion^of
^f^uⁿ^d^s^h^ares^areⁱ^nve^st^o^r^s,^t^h^a^t^dⁱ^ffe^r^e^nt^th^{e f}^uⁿ^d^’^s^p^o^r^tf^o^lio^m^aⁿ^a^g^e^r^,^an^d
^appropri^a^t^e^f^o^{r i}ⁿ^v^e^s^t^ors^,^c^l^a^sse^{s o}^f^m^u^tua^l^fund^th^{at th}^{e code of}^ethⁱ^cs^isⁱⁿ^place
ⁱ^{ki/CRS-RL32157}^dⁱ^sc^lo^sur^e^o^f^the^fund^’s^p^o^r^tf^o^lio^{, co}^m^p^en^satioⁿ^o^f^s^h^ares^{are appropriate f}^o^r^inve^sto^r^s,^dⁱ^sc^lo^sur^e^o^f^the^an^{d en}^f^o^rced.^(S^{ec. 116)}
^g/w^p^o^r^tf^o^lio^m^aⁿ^a^g^e^r^s^{, an}^d^f^uⁿ^d^’^s^p^o^r^tf^o^lio^,
^s^.or^th^{e f}^uⁿ^d^’^s^{code of}^ethⁱ^cs^co^m^p^en^satioⁿ^o^f^p^o^r^tf^o^lio
^le^ak^an^d^an^tif^r^a^u^d^p^o^licies.^m^a^na^ge^r^s^,^aⁿ^d^t^h^a^t^t^h^e^fund
^://wiki^(S^{ec. 201)}^h^a^{s estab}^lish^e^d^an^d^en^f^o^rces^{a code of}^ethⁱ^cs^.
^h^ttp^(S^{ec. 204)}
ⁱ^cs^R^e^qu^ires^f^uⁿ^d^s^an^d^No^p^r^o^v^isioⁿ^.^Dir^{ects th}^{e SEC to}^r^e^q^u^ir^e^R^e^qu^ires^f^uⁿ^d^s^an^d^R^e^qu^ires^f^uⁿ^d^s^,^advⁱ^s^e^rs^{, an}^d
^m^p^lian^c^eⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^t^o^f^uⁿ^d^s^t^o^appoiⁿ^t^aⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^t^o^priⁿ^ci^pal^uⁿ^d^erw^rⁱ^t^e^rs^t^o^adopt
^adopt^{a code of}^et^hⁱ^cs^an^d^com^p^lian^{ce of}^fⁱ^{cer, w}^h^{o w}^ill^adopt^{a code of}^et^hⁱ^cs^an^d^codes^of^ethⁱ^cs^{to prev}^en^t
^polⁱ^cⁱ^e^s^an^{d procedu}^r^es^t^o^report^on^l^y^t^oⁱⁿ^depen^d^en^t^polⁱ^cⁱ^e^s^an^{d procedu}^r^es^t^o^f^r^au^du^len^t^{, deceptiv}^{e, or}
^p^r^ev^en^{t v}ⁱ^o^l^atioⁿ^s^o^f^law^di^rect^ors^.^p^r^ev^en^{t v}ⁱ^o^l^atioⁿ^s^o^f^law^m^aⁿⁱ^p^u^l^a^tⁱ^v^e^c^o^nd^uc^t^.^Fund^s
^aⁿ^d^SE^{C r}^e^gul^a^tⁱ^o^ns,^t^o^(S^{ec. 101(j}⁾⁾^aⁿ^d^SE^{C r}^e^gul^a^tⁱ^o^ns,^t^o^m^u^s^t^adopt^polⁱ^cⁱ^e^s^an^d
^r^e^vⁱ^ew^th^o^s^{e p}^o^licies^r^e^vⁱ^ew^th^o^s^{e p}^o^licies^procedu^r^es^reas^on^ably^desⁱ^gⁿ^e^d
^a^nnua^l^l^y^,^aⁿ^d^t^o^a^ppoiⁿ^t^a^a^nnua^l^l^y^,^aⁿ^d^t^o^a^ppoiⁿ^t^a^to^p^r^ev^en^{t v}ⁱ^o^l^atioⁿ^s^o^f^law^an^d
^com^p^lian^{ce of}^fⁱ^cer.^com^p^lian^{ce of}^fⁱ^{cer, w}^h^o^r^e^gul^a^tⁱ^o^n,^t^o^r^e^vi^e^w^suc^h
^In^depen^d^en^t^di^rect^ors^w^o^u^l^d^cer^tif^y^th^at^p^o^lⁱ^cⁱ^e^{s a}^nnua^l^l^y^,^aⁿ^d^t^o^a^ppoiⁿ^t
^sh^{all cer}^tif^y^th^{at su}^ch^ap^p^r^o^p^r^{iate in}^terⁿ^al^{a ch}^ief^com^p^lian^{ce of}^fⁱ^cer,
^procedu^r^es^an^{d policies}^coⁿ^t^r^o^{ls ex}^isted^..^r^e^p^o^r^tin^g^oⁿ^ly^to^th^{e in}^d^e^p^eⁿ^d^en^t
^{are in}^f^o^rce.^(S^{ec. 301)}^di^rect^ors^.^F^uⁿ^d^s^m^u^s^t^al^s^o^adopt
^(S^{ec. 201)}^r^u^{les to}^p^r^o^t^{ect w}^h^istleb^l^o^w^er^s.
^(S^{ec. 116)}

CRS-13
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^Re^s^t^rⁱ^c^t^ions^{on La}^te^T^r^a^d^{ing, M}^a^r^k^e^t^Tⁱ^{ming, a}^{nd Othe}^r^For^ms^{of T}^r^a^d^ing.
^{te tr}^adⁱⁿ^g^r^u^les^S^{EC d}ⁱ^r^ected^to^w^r^ite^N^o^p^r^o^vⁱ^sⁱ^o^n.^A^m^eⁿ^d^s^t^h^e^I^nve^st^m^e^nt^{SEC d}ⁱ^r^ected^to^w^r^{ite r}^u^les^SEC^{directed to is}^s^u^{e ru}^les^to
^r^u^{les to}^p^r^ev^en^{t af}^ter^-^Co^m^p^an^y^A^c^{t to}^p^r^o^h^ib^it^{to prev}^en^{t an}^{d detect af}^ter-^p^r^ev^en^{t late tr}^adⁱⁿ^g^an^d^to
^h^o^u^r^s^tradin^g^.^{late tr}^adⁱⁿ^g^.^ho^ur^{s t}^r^a^dⁱ^ng.^reg^u^l^{ate th}^{e proces}^sⁱⁿ^g^of^late
^(S^{ec. 205)}^(S^{ec. 101(a))}^(S^{ec. 306)}^orders^receiv^e^{d th}^rou^g^h
ⁱⁿ^term^ediaries^{at th}^{e prev}^iou^s
^day^’^s^pri^ce.
^(S^{ec. 315)}
^SEC^{directed to is}^s^u^{e ru}^les
^r^e^q^u^irⁱⁿ^gⁱⁿ^ter^m^ed^iarⁱ^{es to}
ⁱ^{ki/CRS-RL32157}^prov^{ide f}^uⁿ^d^s^w^ith^s^u^f^fⁱ^cien^t^cu^sto^m^erⁱⁿ^f^o^r^m^atioⁿ^to^allo^w
^g/w^th^em^{to en}^f^o^{rce th}^{eir tradin}^g
^s^.or^p^o^licies.
^le^ak^(S^{ec. 216)}
^://wiki^creas^ed^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^Iⁿ^cr^{eases civ}^{il an}^d^cr^imⁱⁿ^al^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.

^h^ttpⁿ^a^lties^p^eⁿ^a^lties.
^(S^{ec. 101)}

CRS-14
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^k^{et tim}ⁱⁿ^g^Sh^o^r^t-^ter^m^tr^an^sactioⁿ^sⁱⁿ^N^o^provⁱ^sⁱ^oⁿ^.^R^e^quⁱ^r^es^di^s^c^l^o^s^u^{re of}^Sh^o^r^t-^ter^m^tr^an^sactioⁿ^sⁱⁿ^T^h^{e S}^E^C^w^o^u^l^{d requ}ⁱ^r^e
^l^e^s^f^uⁿ^d^sh^ar^{es b}^y^af^f^iliated^m^a^r^k^{et tim}ⁱⁿ^g^p^o^{licies an}^d^f^uⁿ^d^sh^ar^{es b}^y^af^f^iliated^dⁱ^sc^lo^sur^e^o^f^a^fund^{’s m}^a^r^k^e^t
^p^e^r^s^oⁿ^{s (}^f^und^m^a^na^ge^r^s^,^s^t^eps^tak^eⁿ^{to prev}^en^{t abu}^s^e^p^e^r^s^oⁿ^{s (}^f^und^m^a^na^ge^r^s^,^timⁱⁿ^g^p^o^licy⁽^o^r^lack^o^f^su^ch^a
^di^rect^ors^,^advⁱ^s^e^rs^{, or}^o^f^su^ch^p^o^licies.^di^rect^ors^,^advⁱ^s^e^rs^{, or}^p^o^licy⁾^.
^uⁿ^d^erw^rⁱ^t^e^rs^{) are}^(S^{ec. 101(d))}^uⁿ^d^erw^rⁱ^t^e^rs^{) are}^(S^{ec. 312)}
^prohⁱ^bⁱ^t^e^d.^prohⁱ^bⁱ^t^e^d.
^P^r^o^h^ib^{its sh}^o^r^t-^ter^m^Sh^o^r^t-^ter^m^tr^an^sactioⁿ^s^b^y^f^uⁿ^d
^SEC^{directed to m}^a^k^e^tran^s^action^sⁱⁿ^f^uⁿ^d^s^h^ares^Dir^{ects th}^{e SEC to}^r^e^q^u^ir^eⁱⁿ^sid^e^r^s^{, af}^f^{iliates, ad}^vⁱ^ser^s^{, o}^r
^r^u^{les p}^e^r^m^ittin^g^f^uⁿ^d^{s to}^byⁱⁿ^t^e^res^t^{ed pers}^on^s^(f^uⁿ^d^f^uⁿ^d^{s th}^{at d}^oⁿ^o^{t allo}^w^und^e^r^w^rⁱ^t^e^r^s^w^o^ul^d^b^e
^ch^arg^e^redem^p^tion^f^eesⁱⁿ^m^a^na^ge^r^s^,^dⁱ^r^e^c^t^o^r^s,^m^a^r^k^{et tim}ⁱⁿ^g^tr^adⁱⁿ^g^to^p^r^o^h^ib^ited^.^T^h^{e p}^r^o^h^ib^itioⁿ
^ex^ces^s^of^{2% to prev}^en^t^a^d^vi^se^r^s^,^o^r^und^e^r^w^rⁱ^t^e^r^s⁾^.^ch^arg^e^{a redem}^p^tion^f^{ee f}^o^r^ex^clu^d^es^m^oⁿ^e^y^m^a^rk^{et f}^uⁿ^d^s^.
^sh^o^r^t-^ter^m^tr^adⁱⁿ^g^th^{at th}^e^(S^{ec. 101(i}⁾⁾^sh^o^r^t-^ter^m^tr^ad^es.^T^h^{e S}^E^C^w^o^u^l^{d def}ⁱⁿ^e^s^h^ort^-
ⁱ^{ki/CRS-RL32157}^SEC^deem^s^uⁿ^f^{air to}^s^h^areh^olders^.^(S^{ec. 303)}^term^tradin^g^.^(S^{ec. 314)}
^g/w^(S^{ec. 203)}
^s^.or^Directs^th^{e SEC}^{to requ}^{ire f}^uⁿ^d^s
^le^ak^th^{at d}^oⁿ^o^{t allo}^w^m^a^r^k^{et tim}ⁱⁿ^g
^://wiki^tradin^g^{to ch}^arg^e^{a redem}^p^tion^f^{ee f}^o^{r s}^h^ort-^term^trades^{, an}^d
^h^ttp^perm^its^s^u^ch^f^ees^{to ex}^{ceed 2%.}
^(S^{ec. 314)}
^Directs^th^{e SEC}^{to requ}^{ire by}
^r^u^{le th}^{at in}^ter^m^ed^iarⁱ^{es p}^r^o^v^id^e
^m^u^tu^{al f}^uⁿ^d^{s w}^ith^th^{e id}^en^tities
^of^th^{eir cu}^s^t^om^ers^s^o^th^{at th}^e
^f^uⁿ^d^can^en^f^o^{rce its}^tradin^g^an^d
^f^{ee p}^o^licies.
^(S^{ec. 216)}

CRS-15
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
ⁱⁿ^atioⁿ^o^f^SEC^{directed to m}^a^k^e^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^{SEC d}ⁱ^r^ected^to^m^a^k^e^r^u^les^T^h^{e S}^E^C^w^o^u^l^{d by}^ru^l^e^requⁱ^r^e
^r^u^l^e^{s go}^ve^rⁿⁱ^{ng t}^h^e^use^o^f^go^ve^rⁿⁱ^{ng t}^h^e^use^o^f^faⁱ^r^th^{e ad}^o^p^tioⁿ^o^f^f^a^ir^v^a^lu^e
^f^a^ir^v^a^lu^{e p}^r^icin^g^to^set^v^a^lu^{e p}^r^icin^g^to^{set n}^e^{t asset}^pri^cⁱⁿ^g^,^w^h^en^m^a^rk^et^qu^ot^atⁱ^oⁿ^s
ⁿ^e^{t asset v}^a^lu^{es w}^h^en^v^a^lu^es^w^h^en^m^a^rk^et^{do n}^o^{t accu}^rately^ref^l^{ect portf}^olio
^m^a^rk^{et qu}^otation^s^are^q^u^o^t^a^tⁱ^o^{ns a}^r^e^una^vaⁱ^l^a^b^l^e^va^l^u^e^.
^uⁿ^a^v^aⁱ^l^a^bl^{e or ou}^t^of^dat^e^.^{or ou}^t^of^dat^e^{. F}^uⁿ^d^s^an^d^(S^{ec. 313)}
^(S^{ec. 204)}^advⁱ^s^e^rs^w^o^u^l^{d be requ}ⁱ^r^ed
^t^o^adopt^f^o^rm^al^polⁱ^cⁱ^e^s
^r^e^g^a^r^dⁱⁿ^g^p^r^ice-^settin^g
^procedu^r^es^an^{d certif}^y^th^at
^t^h^e^y^w^e^r^e^b^eⁱ^{ng a}^d^he^r^e^d^t^o^.
^(S^{ec. 304)}
ⁱ^{ki/CRS-RL32157}^eⁿ^sioⁿ^o^f^M^u^t^u^a^l^fund^{s m}^a^y^no^t^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.

^g/w^e^m^p^tioⁿ^s^susp^eⁿ^d^inve^sto^r^{s’ r}ⁱ^{ght o}^f
^s^.or^r^e^d^e^m^p^tⁱ^o^{n unl}^e^{ss t}^h^e
^le^ak^pri^m^ary^s^t^ock^m^a^rk^etⁱ^s
^://wiki^clos^{ed or oth}^e^{r em}^erg^eⁿ^c^y^ex^{ists. SEC is d}ⁱ^r^ected^to
^h^ttp^m^a^ke^r^u^l^e^{s sp}^e^cⁱ^fyⁱ^{ng t}^h^e
^coⁿ^d^itioⁿ^s^uⁿ^d^er^w^h^ich
^tradin^g^m^a^y^{be res}^t^ricted.
^(S^{ec. 105)}

CRS-16
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^Othe^r^P^r^ov^is^ions^.
^lo^sur^e^o^f^Co^dⁱ^fⁱ^{es SEC r}^u^{les th}^at^N^o^p^r^o^vⁱ^sⁱ^o^n.^N^o^p^r^o^vⁱ^sⁱ^o^n.^N^o^p^r^o^vⁱ^sⁱ^o^n.^Re^q^uⁱ^r^e^s^fund^{s t}^o^r^e^p^o^r^t^a^nnua^l^l^y
^y^v^o^t^e^s^r^e^q^u^ir^{e f}^uⁿ^d^{s to}^dⁱ^sclo^se^on^th^{eir prox}^y^v^o^tin^g^{record, an}^d
^h^o^w^th^ey^v^o^tedⁱⁿ^p^r^o^x^y^to^m^a^k^e^th^{is in}^f^o^r^m^atioⁿ
^con^t^es^ts^of^com^p^an^ies^av^{ailable v}ⁱ^{a th}^{e In}^tern^{et or a}
^w^h^os^{e s}^h^ares^th^ey^h^o^ld.^to^ll-^f^r^{ee telep}^h^oⁿ^{e n}^u^m^b^e^r^.
^(S^{ec. 109)}^(S^{ec. 215)}
^dg^{e f}^uⁿ^d^s^P^rohⁱ^bi^t^s^pers^on^s^f^r^om^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^Prohⁱ^bⁱ^t^s^pers^on^s^f^r^om^P^r^o^hⁱ^bⁱ^t^sⁱ^nve^st^m^e^nt^a^d^vi^se^r^s^aⁿ^d
^se^r^vⁱ^{ng a}^s^a^d^vi^se^r^s^o^r^se^r^vⁱ^{ng a}^s^a^d^vi^se^r^s^o^r^port^f^olⁱ^o^m^aⁿ^a^g^e^rs^f^r^om
^m^a^na^ge^r^s^o^f^b^o^t^{h m}^u^t^u^a^l^m^a^na^ge^r^s^o^f^b^o^t^{h m}^u^t^u^a^l^p^r^o^v^idⁱⁿ^g^ser^v^{ices to}^b^o^t^h^m^u^tu^al
ⁱ^{ki/CRS-RL32157}^fund^{s a}ⁿ^d^he^d^g^e^fund^s.^(S^{ec. 202)}^fund^{s a}ⁿ^d^he^d^g^e^fund^s.^(S^{ec. 302)}^f^uⁿ^d^s^an^{d h}^e^dg^{e f}^uⁿ^d^s^,^ex^{cept as}^p^e^r^m^itted^b^y^{SEC ex}^em^p^tioⁿ^.
^g/w^(S^{ec. 316)}
^s^.or
^le^ak^e^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^Dir^{ects th}^{e SEC to}^m^a^k^e^r^u^{les to}
^lo^sur^e^prev^en^{t s}^e^lectiv^{e dis}^c^los^u^{re of}
^://wiki^m^u^tu^{al f}^uⁿ^d^p^o^r^tf^o^lio^coⁿ^t^en^ts.
^h^ttp^(S^{ec. 317)}
^b^itr^atioⁿ^o^f^SEC^{directed to s}^t^u^d^y^N^o^provⁱ^sⁱ^oⁿ^Dⁱ^r^ect^s^t^h^{e S}^E^C^t^o^adopt^SEC^{directed to s}^t^u^d^y^SEC^{directed to s}^t^u^d^y^tren^dsⁱⁿ
^st^o^r^dⁱ^sp^ut^e^s^tr^en^d^sⁱⁿ^m^u^tu^{al f}^uⁿ^d^r^u^{les g}ⁱ^vⁱⁿ^g^co^m^p^lain^an^{ts in}^tr^en^d^sⁱⁿ^m^u^tu^{al f}^uⁿ^d^m^u^tu^{al f}^uⁿ^d^arbitration^claim^s
^arbitration^claim^s^{, an}^{d th}^e^m^u^t^u^a^l^fund^dⁱ^sp^ut^e^s^t^h^e^arbitration^claim^s^{, an}^{d th}^e^sⁱⁿ^{ce 1995, an}^{d al}^t^e^rn^atⁱ^v^e
^reas^on^s^f^o^{r th}^{e in}^creas^{e in}^rⁱ^ght^t^o^ha^ve^t^h^eⁱ^r^reas^on^s^f^o^{r th}^{e in}^creas^{e (if}^m^ean^{s to}^{settle su}^ch^dⁱ^sp^u^t^{es o}^u^t
^s^u^ch^cl^ai^m^s^sⁱⁿ^{ce 1995.}^co^m^p^lain^{ts h}^ear^dⁱⁿ^an^an^y⁾ⁱⁿ^s^u^ch^claim^s^sⁱⁿ^c^e^of^cou^r^t^.
^(S^{ec. 112)}ⁱⁿ^d^e^p^eⁿ^d^en^{t ar}^b^itr^atioⁿ¹⁹⁹⁵^(S^{ec. 413)}
^fo^r^u^m^.^(S^{ec. 406)}
^(S^{ec. 209)}
^h^istleb^l^o^w^er^s^A^m^u^tu^{al f}^uⁿ^d^’^s^au^dⁱ^t^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^Req^u^ir^{es f}^uⁿ^d^{s to}^estab^lish^F^uⁿ^d^s^m^u^s^t^adopt^ru^l^e^s^t^o^prot^ect
^com^m^{ittee s}^h^{all be}^polⁱ^cⁱ^e^s^an^{d procedu}^r^es^t^o^w^hⁱ^s^t^l^e^bl^ow^ers^w^h^{o report}
^res^pon^sⁱ^bl^{e f}^o^{r m}^oⁿⁱ^t^o^riⁿ^g^prot^ect^w^hⁱ^s^t^l^e^bl^ow^ers^f^r^om^vi^o^l^a^tⁱ^o^{ns o}^f^l^a^w^,^r^e^gul^a^tⁱ^o^n,^o^r
^co^m^p^lain^{ts f}^r^o^m^f^uⁿ^d^r^e^taliatioⁿ^.^ethⁱ^{cal s}^t^an^dards^.
^em^pl^oy^ees^an^{d ot}^h^e^rs^(S^{ec. 301)}^(S^{ec. 116)}

^r^e^ga^r^dⁱ^{ng q}^u^e^s^tⁱ^o^na^b^l^e
^acco^uⁿ^tin^g^an^d^au^d^itin^g
^practⁱ^ces^{. (S}^{ec. 104)}

CRS-17
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
ⁿ^d^adv^e^rtⁱ^sⁱⁿ^g^N^{o prov}ⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^prov^isioⁿ^.^No^p^r^o^v^isioⁿ^.^Dir^{ects th}^{e SEC to}^estab^lish
^s^t^an^dards^an^{d ben}^c^h^m^ark^s^f^o^r
^c^l^aⁱ^m^s^r^e^ga^r^dⁱ^{ng i}^nve^st^m^e^nt
^p^e^r^f^o^r^m^a^nc^e^c^o^nt^aⁱ^ne^dⁱⁿ^fund
^a^d^ve^r^tⁱ^sⁱ^ng.
^(S^{ec. 217)}
^S^t^udie^s^a^{nd Re}^por^ts^Ca^lle^{d For}^.
^st^m^e^nt^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^{SEC to}^stu^d^y^an^d^r^e^p^o^r^{t to}
^vⁱ^ser^coⁿ^f^licts^Coⁿ^g^r^{ess o}ⁿ^coⁿ^f^{licts b}^e^tw^een
ⁱⁿ^ter^e^st^fund^{s a}ⁿ^d^a^d^vi^se^r^s^,^w^h^e^t^he^r
ⁱ^{ki/CRS-RL32157}^c^h^a^nge^{s i}ⁿ^l^a^w^o^r^r^e^gul^a^tⁱ^o^{n a}^r^eⁿ^{eeded to am}^{eliorate s}^u^ch
^g/w^con^f^licts^{or to en}^cou^r^ag^{e in}^tern^al
^s^.orⁱ^nve^st^m^e^nt^m^a^na^ge^m^e^nt^b^y
^le^ak^m^u^t^u^a^l^fund^s.
^(S^{ec. 410)}
^://wiki
^h^ttp^f^t^d^o^llar^SEC^{directed to s}^t^u^d^y^s^o^f^t^{No prov}^is^ion^.^SEC^{to is}^s^u^{e a con}^cept^SEC^{directed to s}^t^u^d^y^s^o^f^t^N^o^s^t^u^d^y^requⁱ^r^{ed, bu}^t^S^{ec. 311}
^a^nge^m^e^nt^{s a}ⁿ^d^dol^l^a^{r arran}^g^e^m^eⁿ^t^s^releas^{e an}^{d report to}^dol^l^a^{r arran}^g^e^m^eⁿ^t^s^—^p^r^o^h^ib^{its so}^f^t^d^o^llar
^s^action^cos^t^sⁱ^nvo^l^vⁱ^{ng fund}ⁱ^nve^st^m^e^nt^C^oⁿ^g^r^es^s^on^port^f^olⁱ^o^t^r^en^ds^{, am}^ouⁿ^t^s^,^ben^e^fⁱ^t^s^a^r^r^a^nge^m^e^nt^s.
^advⁱ^s^e^rs^{— tren}^ds^,^tr^an^sactioⁿ^co^{sts, in}^clu^dⁱⁿ^g^aⁿ^d^c^o^{sts to}^inve^sto^r^s,
^a^m^o^unt^s,^b^e^ne^fi^t^s^aⁿ^d^c^o^m^mⁱ^ssioⁿ^,^sp^r^e^a^d^,^pos^sⁱ^bl^{e con}^f^lⁱ^c^t^s^of
^c^o^{sts to}^inve^sto^r^s,^p^o^ssib^l^e^opport^uⁿⁱ^t^y^{, an}^{d m}^a^rk^etⁱⁿ^teres^t^{, an}^{d tran}^s^p^aren^cy^.
^coⁿ^f^{licts o}^fⁱⁿ^ter^e^{st, an}^d^im^{pact cos}^t^s^.^(S^{ec. 404)}
^tran^s^p^aren^cy^{— an}^{d to}^(S^{ec. 101(h}⁾⁾
^m^a^k^e^legⁱ^slativ^e
^recom^m^eⁿ^d^ation^s^.
^(S^{ec. 111)}
^b^itr^atioⁿ^SEC^{directed to s}^t^u^d^y^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^S^E^C^di^rect^{ed t}^o^s^t^u^d^y^SEC^{directed to s}^t^u^d^y^tren^dsⁱⁿ
^s^tr^en^d^sⁱⁿ^m^u^tu^{al f}^uⁿ^d^tr^en^d^sⁱⁿ^m^u^tu^{al f}^uⁿ^d^m^u^tu^{al f}^uⁿ^d^arbitration^claim^s
^arbitration^claim^s^{, an}^{d th}^e^arbitration^claim^s^{, an}^{d th}^e^sⁱⁿ^{ce 1995, an}^{d al}^t^e^rn^atⁱ^v^e
^reas^on^s^f^o^{r th}^{e in}^creas^{e in}^reas^on^s^f^o^{r th}^{e in}^creas^{e (if}^m^ean^{s to}^{settle su}^ch^dⁱ^sp^u^t^{es o}^u^t
^s^u^ch^cl^ai^m^s^sⁱⁿ^{ce 1995.}^an^y⁾ⁱⁿ^s^u^ch^claim^s^sⁱⁿ^c^e^of^cou^r^t^.
^(S^{ec. 112)}^1995.^(S^{ec. 413)}

^(S^{ec. 406)}

CRS-18
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^eatioⁿ^o^f^a^No^p^r^o^v^isioⁿ^.^{SEC sh}^{all stu}^d^y^an^d^No^p^r^o^v^isioⁿ^.⁽^S^ectioⁿ¹⁰¹^GA^{O to}^stu^d^y^th^{e f}^easib^ility^{Directs GA}^{O to}^stu^d^y^th^e
^u^t^u^a^l^Fund^r^e^p^o^r^{t to}^Coⁿ^g^r^{ess o}ⁿ^th^e^es^tablis^h^e^s^s^u^ch^{a board.)}^an^d^b^eⁿ^e^f^{its (}ⁱ^f^an^y⁾^to^ef^fⁱ^cacy^of^th^{e SEC}^’^s^cu^rren^t
^ersⁱ^g^h^t^B^o^ard^cr^eatioⁿ^o^f^an^en^tity^w^ith^s^h^areh^ol^ders^of^es^t^a^blⁱ^s^hⁱⁿ^g^o^r^gaⁿⁱ^z^a^tⁱ^o^na^l^st^r^u^c^t^ur^e^a^sⁱ^t
ⁱⁿ^sp^ectioⁿ^an^d^{a Mu}^tu^{al Fu}ⁿ^d^Ov^ersⁱ^g^h^t^af^f^ects^th^{e reg}^u^l^ation^of^m^u^tu^al
^en^f^o^rcem^en^{t au}^th^ority^B^o^ar^d^w^ithⁱⁿ^sp^ectioⁿ^,^fund^s.
^ov^{er m}^u^t^u^al^f^uⁿ^d^boards^ex^amⁱⁿ^ation^,^an^d^(S^{ec. 412)}
^of^di^rect^ors^,^f^uⁿ^d^{ed by}^en^f^o^rcem^en^{t au}^th^ority^ov^er
^a^sse^ssm^eⁿ^{ts o}ⁿ^m^u^tua^l^m^u^t^u^al^f^uⁿ^d^boards^of
^f^uⁿ^d^s^,^an^{d appoi}ⁿ^t^{ed by}^di^rect^ors^.
^th^{e SEC.}^(S^{ec. 401)}
^{(Sec. 3(e))}
ⁱ^{ki/CRS-RL32157}^equ^acy^of^e^{dial action}^s^{SEC to}^r^e^p^o^r^{t to}^Coⁿ^g^r^ess^oⁿ^m^a^r^k^{et tim}ⁱⁿ^g^an^d^late^No^p^r^o^v^isioⁿ^.^No^p^r^o^v^isioⁿ^.^GA^{O d}ⁱ^r^ected^to^stu^d^y^th^e^coordiⁿ^a^tⁱ^oⁿ^of^t^h^e^SEC^{directed to s}^t^u^d^y^th^e^coordiⁿ^a^tⁱ^oⁿ^bet^w^een^S^E^C
^g/w^t^r^a^dⁱ^ng,ⁱⁿ^c^l^udⁱ^{ng (}¹⁾^en^f^o^r^cem^en^{t activ}^{ities o}^f^h^eadqu^arters^{, reg}ⁱ^on^{al of}^fⁱ^ces^,
^s^.or^e^c^o^no^mⁱ^c^ha^r^m^t^o^l^o^ng-^th^{e SEC}^an^{d th}^{e s}^t^ates^.^an^{d s}^t^{ate an}^{d local reg}^u^l^ators^an^d
^le^ak^t^e^rm^s^h^areh^ol^ders^{, (2) t}^h^e^(S^{ec. 402)}^law^en^f^o^rcem^en^t.
^://wiki^SE^{C’s fi}^ndⁱ^{ngs r}^e^ga^r^dⁱⁿ^g^s^u^ch^tradin^g^practices^{, (3)}^{SEC to}^stu^d^y^th^{e allo}^catioⁿ^(S^{ec. 411)}

^h^ttp^w^h^en^an^{d h}^o^w^th^{e SEC}^an^{d adequ}^acy^of^its
^dis^c^ov^{ered th}^{at s}^u^ch^reg^u^l^atory^an^{d en}^f^o^rcem^en^t
^t^r^a^dⁱ^{ng w}^a^{s ha}^r^mⁱⁿ^g^r^e^so^u^r^{ces d}^e^v^o^ted^to^m^u^tu^al
^s^h^areh^olders^{, (4) s}^t^eps^fund^s.
^tak^eⁿ^b^y^th^{e SEC to}^(S^{ec. 403)}
^prot^ect^l^oⁿ^g^-^t^e^rm
^s^h^areh^olders^{, an}^{d (5)}^S^E^C^t^o^report^on^econ^o^mⁱ^c
^ad^d^itioⁿ^a^{l leg}ⁱ^slatioⁿ^o^r^h^a^r^m^cau^sed^b^y^{late tr}^adⁱⁿ^g
^r^e^gul^a^tⁱ^o^{n ne}^e^d^e^d^t^o^an^{d m}^a^rk^{et tim}ⁱⁿ^g^an^{d th}^e
^{protect s}^h^areh^olders^.^SE^{C’s a}^c^tio^{ns sinc}^e
^(S^{ec. 206)}^becomⁱⁿ^g^aw^{are of}^th^os^e
^practices^.
^(S^{ec. 405)}

CRS-19
ProvisionH.R. 2420 ^{(Rep. B}^a^k^er)S. 1822^(S^en^{. A}^k^ak^a)S. 1958^{(Sen. Kerry & Kennedy)}S. 1971 ^(Sens^.^{Dodd & Corzine)}S. 2059^{(Sen. Fitzgerald, et al.)}
^dg^{e f}^uⁿ^d^s^N^{o prov}ⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^S^E^C^di^rect^{ed t}^o^s^t^u^d^y^w^h^et^h^e^r
^ad^d^itioⁿ^a^{l r}^e^g^u^l^atioⁿ^o^f^h^e^d^g^e
^fund^{s m}ⁱ^ght^d^e^t^e^r^t^r^a^dⁱ^{ng a}^b^use^s^,
^m^aⁿⁱ^pu^l^a^tⁱ^oⁿ^s^{, an}^{d di}^s^t^ortⁱ^oⁿ^s
^th^{at af}^f^{ect in}^v^e^s^t^orsⁱⁿ^m^u^tu^al
^fund^s.
^(S^{ec. 414)}
^aⁿ^c^{ial liter}^acy^No^p^r^o^v^isioⁿ^.^{SEC sh}^{all stu}^d^y^an^d^No^p^r^o^v^isioⁿ^.^{SEC to}^stu^d^y^th^{e ex}^istin^g^SE^{C t}^o^st^ud^y^m^e^aⁿ^{s o}^f^usi^{ng t}^h^e
^r^e^p^o^r^{t to}^Coⁿ^g^r^{ess o}ⁿ^th^e^lev^e^{l o}^f^fⁱⁿ^aⁿ^c^{ial liter}^acy^In^tern^{et to in}^creas^{e f}ⁱⁿ^aⁿ^c^ial
^ex^istin^g^lev^e^{l o}^f^fⁱⁿ^aⁿ^c^ial^a^m^o^{ng m}^u^t^u^a^l^fund^liter^acy^an^d^to^im^p^r^o^v^{e in}^v^e^sto^r
^liter^acy^am^oⁿ^g^m^u^tu^alⁱⁿ^v^e^sto^r^{s, th}^{e in}^f^o^r^m^atioⁿ^{access to}^m^u^tu^{al f}^uⁿ^d^f^ilin^g^s^.
ⁱ^{ki/CRS-RL32157}^fundⁱ^nve^st^o^r^s,^w^h^a^tⁱⁿ^f^o^r^m^atioⁿ^th^ey^m^o^st^m^o^{st ne}^e^d^e^d^b^y^inve^sto^r^s,^m^e^th^o^d^s^toⁱⁿ^cr^ease^(S^{ec. 415)}
^g/wⁿ^{eed, th}^{e tran}^s^p^aren^cy^of^tran^s^p^aren^cy^{, an}^{d ex}^is^tin^g
^s^.or^f^{ee dis}^c^los^u^{re, an}^{d ef}^f^o^rts^an^{d i}^m^prov^{ed m}^e^t^h^ods^of
^le^ak^an^{d s}^t^rategⁱ^es^{to edu}^cate^e^d^uc^a^tⁱ^{ng i}^nve^st^o^r^s.
^://wikiⁱⁿ^v^e^s^t^ors^.^{(Sec. 5)}^(S^{ec. 501)}
^h^ttp
^u^t^u^a^l^fund^No^p^r^o^v^isioⁿ^.^T^h^{e GA}^{O sh}^{all stu}^d^y^an^d^N^o^provⁱ^sⁱ^oⁿ^.^N^o^provⁱ^sⁱ^oⁿ^.^N^o^s^t^u^d^y^requⁱ^r^{ed, bu}^t^S^{ec 217}
^v^e^r^tisin^g^r^e^p^o^r^{t to}^Coⁿ^g^r^{ess o}ⁿ^th^e^dⁱ^r^{ects th}^{e SEC to}^estab^lish
^im^{pact an}^{d reg}^u^l^ation^of^s^t^an^dards^an^{d ben}^c^h^m^ark^s^f^o^r
^m^u^t^u^a^l^fund^a^d^ve^r^tⁱ^sⁱ^ng,^c^l^aⁱ^m^s^r^e^ga^r^dⁱ^{ng i}^nve^st^m^e^nt
^cu^rren^{t s}^a^les^practicesⁱⁿ^p^e^r^f^o^r^m^a^nc^e^c^o^nt^aⁱ^ne^dⁱⁿ^fund
^th^{e in}^du^s^t^ry^{, an}^{d con}^s^ider^a^d^ve^r^tⁱ^sⁱ^ng.

^r^eco^m^m^eⁿ^d^atioⁿ^s^to
ⁱ^m^prov^{e i}ⁿ^v^e^s^t^or
^protection^.
^{(Sec. 6)}