Associated Press
WASHINGTON — Federal securities regulators announced yesterday that they have adopted a new rule aimed at preventing investors from being misled by deceptively named mutual funds.
The rule adopted by the Securities and Exchange Commission requires, for example, that funds with the words "health care" in their names invest at least 80 percent of their assets in health care company stocks, up from the current 65 percent.
A mutual fund will not be allowed to change the investment strategy suggested by its name unless it gets prior approval from shareholders or notifies them at least 60 days in advance.
In addition, funds may not use a name suggesting their investments are guaranteed by the U.S. government.
The SEC’s Paul Roye said the new rule "will contribute greatly to ‘truth in labeling’ of mutual funds" to investors’ benefit.
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