State Treasurers Roll Out Mutual Fund Disclosure Proposal

January 16, 2004 ( - Mutual fund companies looking to do business with California, North Carolina or New York will have to adhere to strict new principles of disclosure.

California Treasurer Phil Angelides, New York Comptroller Alan Hevesi and North Carolina Treasurer Richard Moore unveiled their Mutual Fund Protection principles at a news conference yesterday.   New York State Attorney General Eliot Spitzer joined the three in calling for reform, according to a news release.

The principles outlined by the trio of treasurers would apply to all mutual funds hired by the three states and their public pension funds to handle retirement plan assets.  “Our message today is simple and clear: if you are a mutual fund that wishes to do business with [California, New York or North Carolina], we expect you to adhere to the highest standards of disclosure and business practices,” Angelides said in a news release. “We are committed to rooting out the bad actors and fraudulent practices that have shaken the mutual fund markets and have harmed millions of families who have placed their savings in mutual funds.

In the manifesto, the states outline the principles they want investment companies to adhere to continue doing business with the states.   Significantly, the states want funds to provide shareholders with at least an annual, customized statement of the charges, expressed in dollars, for management and other expenses they have paid to a fund. The states also want fund boards to have to reveal the rationale behind a fund’s fee structure, and they want to make sure that if funds disclose their portfolio holdings to a third-party, that the same information be made public.

The mutual fund industry has opposed personalized breakdowns as too difficult to develop, and the US Securities and Exchange Commission (SEC) has not pursued them.   Further, the SEC has not yet addressed the other two main issues of the principles , although the commission is proposing requiring quarterly disclosure of portfolios.

To this, the three treasurers say once again they are leading the pack.   “we moved first and we are still waiting for the SEC to catch up to us. We want to make sure we keep the pressure on,” Angelides said.  

Leading the charge is not an unusual position for Angelides, who has long sought to prod the California’s public pension funds into adopting reform policies (SeeA Call to Action). In March 2003, for example, he unveiled a plan to combine the resources of the two funds to create an office charged with pushing aggressive corporate and market reforms to deal with scandals that have socked investors with huge losses (See Angelides Posits Purse Power ).

The three state treasurers carry a significant amount of financial clout.   Moore is the sole trustee of the North Carolina Public Employees Retirement System, with assets of more than $60 billion, and is responsible for the nation’s largest public 401(k) plan with $2.3 billion in assets. Hevesi is the sole trustee of the New York State Common Retirement Fund, the nation’s second largest public pension fund with assets of $106 billion.   Angelides sits on the board of the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) – the nation’s first and third largest public pension funds, respectively – with combined assets of $250 billion.

A copy of the Mutual Fund Protection principles can be found at