SEC to Examine Fund Marketing Practices
WASHINGTON - The Securities and Exchange Commission will conduct a review of mutual fund marketing, chairman Arthur Levitt Jr. told a fund conference here Thursday.The SEC will look at Web sites, sales literature, and advertising to determine whether a fund's performance and investment strategies are accurately portrayed, Mr. Levitt said.
The commission will also call on fund directors to conduct their own examinations, he said. The SEC will be working with the National Association of Securities Dealers Inc. to review current rules.
Separately, the SEC will propose that fund prospectuses show the effect of taxes on performance, he said.
- Cheryl Winokur
N.Y. Life Insurance Gets a Thrift Charter
WASHINGTON - The Office of Thrift Supervision on Thursday granted a thrift charter to New York Life Insurance Co. The move clears the way for the giant insurance company to convert its New York Life Trust Co. unit into a savings bank that will specialize in trust and related services.The thrift will primarily offer individual retirement accounts and irrevocable life insurance trusts during its first three years before expanding into discretionary and nondiscretionary personal trust accounts, according to the agency.
Under the OTS approval, New York Life must obtain approval for cross-marketing initiatives or any other major changes to its business plan. At least 40% of the thrift's directors cannot be officers or employees of the holding company or affiliates. It has to file quarterly reports on its trust accounts and before opening it must submit its procedures for warning customers that trust accounts are not federally insured.
The action came a day after the agency approved an application by AXA Financial Inc. of New York (formerly Equitable Cos.) to convert its state-chartered trust company, Frontier Trust Co., to a federally chartered thrift.
- Dean Anason
Kohlberg Kravis Pledges Its Own Assets
NEW YORK - Kohlberg Kravis Roberts & Co., the world's largest buyout firm, made an unprecedented concession to its lenders Thursday by giving the assets of two of its companies as collateral.The firm said it would alter the terms of a $1.1 billion loan that financed its acquisition of Shoppers Drug Mart Inc. and a $616 million loan to Alliance Imaging Inc.
Led by Canadian Imperial Bank of Commerce and Deutsche Bank AG, the lenders pushed the 24-year-old firm to yield the assets because they didn't sell as much of the loans, which were made last year, as they'd intended. That left them with more debt than planned.
Both loans, which had fallen below their face value in secondary trading, have gained since KKR dropped its opposition to allowing lenders to attach the borrower's assets. KKR, which has been involved in transactions worth more than $96 billion, was one of the only buyout firms that offered just the stock of the company it was acquiring as security for its lenders.
- Bloomberg News
Fed: Rate Hike Needed to Cool Spending
WASHINGTON - Interest rates will have to rise to slow consumer spending and keep the economy from overheating, Federal Reserve Chairman Alan Greenspan said.His comments to Congress Thursday suggest the Fed will boost borrowing costs to the highest level in at least five years.
There is little evidence the economy is slowing after four Fed interest rate increases since June, Mr. Greenspan told the House Banking Committee. Surging stocks are contributing to consumer demand's rising faster than the economy's ability to produce goods and services, he said.
"The profoundly beneficial forces driving the American economy to competitive excellence are also engendering a set of imbalances that, unless contained, threaten our continuing prosperity," Mr. Greenspan said.
