On November 10, 2009, Senate Banking Committee Chairman Christopher Dodd (DConn.) unveiled the Restoring American Financial Stability Act of 2009 (the Bill). The Bill, if enacted, would bring sweeping changes to financial regulation. Along with a general restructuring of the system of federal financial regulation, the Bill contains four provisions specifically directed at registered investment companies under the 1940 Act.  

  1. The Bill would direct the SEC to conduct a study of open-end mutual fund investors and report back to the Senate Banking Committee and the House Financial Services Committee. The study would examine:
    • the existing level of financial literacy among mutual fund investors;
    • the most useful information for investors considering a purchase of mutual fund shares;
    • methods to improve the disclosure of fees and conflicts of interest;
    • existing private and public efforts to educate investors; and
    • a strategy to increase the financial literacy of investors that results in a positive change in investor behavior.
  2. The Bill would direct the Comptroller General to conduct a study of open-end mutual fund advertising and report back to the Senate Banking Committee and the House Financial Services Committee. The study would examine:
    • existing and proposed regulatory requirements for mutual fund advertisements;
    • current mutual fund marketing practices;
    • the impact of mutual fund advertising on consumers; and
    • recommendations to improve mutual fund advertising to ensure that investors can make informed financial decisions when purchasing shares.
  3. The Bill would amend the 1940 Act to clarify that the SEC may require disclosure to investors before the purchase of mutual fund shares.
  4. The Bill would amend the 1940 Act to provide that control persons, and aiders and abettors are liable for violations of the 1940 Act.