[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1089 Referred in Senate (RFS)]

  2d Session
                                H. R. 1089


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                   IN THE SENATE OF THE UNITED STATES

                             April 4, 2000

Received; read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 AN ACT


 
   To require the Securities and Exchange Commission to require the 
    improved disclosure of after-tax returns regarding mutual fund 
                  performance, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Mutual Fund Tax Awareness Act of 
2000''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Taxes can be the single biggest cost associated with 
        mutual funds. The average stock fund investor has lost up to 3 
        percentage points of return every year to taxes.
            (2) The average portfolio turnover rate for an actively 
        managed (nonindex) fund has increased from 30 percent 20 years 
        ago to almost 90 percent today, and average capital gains 
        distributions of growth funds, per share, have more than 
        doubled in the last 10 years.
            (3) If a fund's performance is based mostly on short-term 
        gains, investors can lose a significant part of their return to 
        taxes.
            (4) Performance figures that mutual funds generally 
        disclose to their shareholders are net of fees and expenses, 
        but not taxes, and therefore do not represent the impact taxes 
        have on an investor's return.
            (5) This disclosure focuses on how much money investors 
        made before taxes, and not on how much money investors actually 
        got to keep.
            (6) Improved disclosure of the effect of taxes on mutual 
        fund performance would allow shareholders to compare after-tax 
        returns to raw performance, and would permit the investors to 
        determine whether the fund manager tries to minimize tax 
        consequences for shareholders.
            (7) While the mutual fund prospectus details the average 
        annual portfolio turnover rate, the prospectus may not 
        expressly inform shareholders about the impact the portfolio 
        turnover rate has on total returns.

SEC. 3. IMPROVEMENTS IN DISCLOSURE REQUIREMENTS.

    Within 18 months after the date of the enactment of this Act, the 
Securities and Exchange Commission shall revise regulations under the 
Securities Act of 1933 and the Investment Company Act of 1940 to 
require, consistent with the protection of investors and the public 
interest, improved disclosure in investment company prospectuses or 
annual reports of after-tax returns to investors.

            Passed the House of Representatives April 3, 2000.

            Attest:

                                                 JEFF TRANDAHL,

                                                                 Clerk.