Breaking sharply with tradition, the Securities and Exchange Commission has ruled that mutual fund managers who jump to another fund company can take their performance records with them.

The development is likely to stoke the already-heated competition for star money managers by, in effect, making the bragging rights on top- performing funds a portable commodity.

Observers said the ruling, which the SEC issued quietly last week, is the latest in a series of significant changes to the mutual fund disclosure document, known as the prospectus.

"There's a desire to permit a wider latitude of information in the prospectus on performance - and presumably advertising, if it's done appropriately," said Donald W. Smith, a partner in the Washington law firm of Kirkpatrick & Lockhart.

While the SEC's ruling involved a single firm - Bramwell Capital Management, founded by a former portfolio manager for the Gabelli Funds - it could be widely invoked by fund companies, including those operated by banks.

Already, Strong Capital Management, a $15.4 billion-asset mutual fund company in Milwaukee, is said to be exploring the decision. The company - which this month wooed Mary Lisanti, a top equity fund manager at Bankers Trust New York Corp., to its fold - declined to comment on its marketing plans.

The decision is certainly a double-edged sword for banks. As relative newcomers to the mutual fund management business, banks could buy credibility by hiring star money managers and touting their track records for past employers. But observers said that, without dramatic changes in banks' compensation, it is more likely that they would continue to lose star fund managers to rivals.

"If you're an outstanding investment manager, most banks have difficulty rewarding you adequately given internal pay structures," said Geoffrey H. Bobroff, a mutual fund consultant based in East Greenwich, R.I.

In its letter, the SEC approved noted fund manager Elizabeth Bramwell's request to use the impressive three and five-year returns she racked up for Gabelli & Co. in the prospectus of her breakaway fund.

In a telephone interview, Ms. Bramwell predicted that the decision will "facilitate start-ups and help young companies getting going."

The SEC letter left unanswered whether funds could boast of another fund's performance in advertisements, reserving that decision for the National Association of Securities Dealers.

But one securities attorney said companies that are not NASD members could begin including specific performance results in their advertising right away. Some funds are already testing the limits on advertising past performance.

Robertson Stephens & Co., for example, boldly trumpets in its ads John Wallace's success managing Oppenheimer's Main Street Income & Growth Fund - a portfolio initially sold exclusively through California Federal Savings. One ad goes so far as to include a mini-resume of the funds Mr. Wallace managed, but stops short of including actual performance data.

Although Bankers Trust faces the prospect that the track record of several of its funds could be used to tout another company's product, a spokesman said there is no cause for worry.

The stellar performance of the BT Investment Small Cap Fund - the hottest of four portfolios that Ms. Lisanti ran - was very much a collaborative effort, reflecting "excellent results produced over a period spanning three senior managers," the spokesman said. Seven people who collaborated with Ms. Lisanti on the fund are still at the bank, he added.

Indeed, many bankers claim that they have shunned lone managers for a team approach, making it difficult for competitors to cherry-pick their best people.

"We don't operate under a star system, so it's a little bit harder to lay specific claim to performance results," said David S. Toth, senior vice president and director of mutual funds at Boatmen's Bancshares, St. Louis.

The ruling on the Bramwell funds is the latest in a series of SEC rulings that essentially allow new or young mutual fund companies to spin fund history almost overnight.

Last September, for instance, the SEC permitted new mutual funds to tout the long-term historical results of investment vehicles that were precursors to the funds, such as common trusts, pooled accounts, or limited partnerships. That ruling, which came in a letter to Massachusetts Mutual Life Insurance Co., is seen as a boon to banks which often seed new mutual funds with assets from old trust accounts.

But performance as a marketing tool can only go so far, experts warn. "More than ever performance is the thing that's in vogue," Mr. Bobroff said. "But everyone seems to have forgotten that past performance is no guarantee of future results."

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