“After years of debate, the SEC is moving closer to requiring mutual funds to give investors a clearer idea of where their money is invested and what they’re paying in fees,” writes Ian McDonald in today’sWall Street Journal.

“The Securities and Exchange Commission will vote, in an open meeting Wednesday, on whether to propose new rules requiring mutual funds to file a list of their complete holdings each quarter with the SEC. For decades mutual funds have only been required to list their complete portfolio holdings twice each year in shareholder reports that are often stale by the time they reach investors’ mailboxes.”

“While the proposal calls for greater portfolio transparency, an idea long resisted by the fund industry, it would also slim the holdings portion of shareholder reports. Funds would be allowed to summarize their holdings and money-market funds could omit a list of portfolio holdings as long as one is filed quarterly with the SEC.”

“The proposal also calls for shareholder reports to include the fees shareowners paid during the period covered, as well as management’s discussion of the fund’s performance over that stretch.”

“While significant, Wednesday’s meeting is only the first step in the rule-making process. If the proposal is passed by the SEC’s four commissioners and Chairman Harvey Pitt, next would come a public comment period where individuals and fund companies would weigh in. After reviewing those comments, the SEC would decide whether or not to make the new rules official.”

“The proposal’s full details won’t be known until Wednesday’s meeting, but the amendments appear to balance the needs of financial advisers and Main Street investors. Advisers and fund-trackers would be armed with fresher and fuller data via the public filings, while shareholders wouldn’t be overwhelmed with several pages of dated holdings data.”

“This would be the latest of several notable rule changes in regards to transparency in the mutual-fund world during Paul Roye’s tenure as director of the Commission’s Investment Management unit — he took the post in 1998.”

“Over the past two years petitions from labor groups like the AFL-CIO and consumer groups like Oxford, Miss-based Fund Democracy led to new rules for more precise fund names and a current proposal requiring funds to disclose their proxy votes quarterly.”

“If passed, the holdings-disclosure rules would make a hat trick for these persistent groups.”

” ‘It’s a huge step,’ says Mercer Bullard, a law professor, former SEC attorney, and founder of Fund Democracy. ‘It’s amazing how much has changed in the last two years.’ “