Responding to abuses in the mutual fund industry, the Securities and Exchange Commission unanimously approved rules today to make the activities of mutual funds more transparent.

SEC commissioners approved a recommendation, submitted last December, to require mutual funds to disclose more about their policies for giving some large investors sales fee discounts.

The commissioners also ordered that that mutual funds adopt new ethics rules, including a requirement that fund managers report any investments they make in their company’s funds.

Benefits known as “breakpoint” discounts are awarded to buyers of large blocks of front-end-loan fund shares on a graduated basis, depending on the size of the purchase.

In late 2002, the National Association of Securities Dealers (NASD) raised questions about whether mutual fund investors were receiving promised “breakpoint” discounts.

Last February 15, following an examination of 43 broker-dealers by the NASD, the SEC and the New York Stock Exchange, brokerage firms agreed to pay US$21.5 million in combined fines for not granting “breakpoint” discounts during 2001 and 2002.

“While it is incumbent upon funds and brokers to give investors the breakpoint discounts they are promised, an investor who understands the breakpoint opportunities is unlikely to remain silent in the face of an overcharge,” William Donaldson, SEC chairman, said in a statement.

The new SEC codes of ethics for investment advisers outlines general standards to prevent conflicts of interest and requires managers to report promptly any code violations to the fund’s chief compliance officer.

Fund managers would be required to report their trading internally to the fund company, which would then be able to make the information available to SEC inspectors.