SEC Requires Fund Investments to Match Name

February 2, 2001 ( - The Securities and Exchange Commission has published a final rule requiring investment firms to invest at least 80% of its assets in the type of investment implied by its name.

The rule is effective March 31, 2001, but registered companies will have until July 31, 2002 to be in compliance. The rule applies to all registered investment companies, including mutual funds, closed-end investment companies and unit investment trusts.

Up till now, the SEC’s Division of Investment Management has only required that 65% of a fund’s assets be invested in the type of securities suggested by the fund name.  They first proposed raising the limit in 1997.

However, the SEC said the 80% investment requirement was not intended to create a “safe harbor”, and a name could be ” materially deceptive and misleading” even if a firm complies with the 80% requirement.

– Nevin Adams

The text of the rule is in the February 1 Federal Register at