A Securities and Exchange Commission official gave modest backing to legislation now before Congress that would largely federalize the regulation of mutual funds.

Barry P. Barbash, director of the SEC's division of investment management, said the securities bill sponsored by Rep. Jack Fields, R-Tex., would be the most comprehensive reform in 26 years.

The comments were made here before more than 1,500 mutual fund executives, lawyers, and accountants at the Investment Company Institute's mutual funds and investment management conference.

Mutual funds are now regulated by a host of state securities agencies as well as the SEC and other federal regulators. The bill would concentrate mutual-fund regulation in Washington.

Mr. Barbash said the bill would be less a revolution than an incremental change in the Investment Company Act of 1940.

Congress' decision to merely fine-tune "shows the basic soundness of the act," Mr. Barbash said.

Mr. Barbash also spoke favorably of the propsed revision in the legislation of rules governing the sale of insurance products, such as variable annuities. He told the audience that current regulations are "round holes into which square pegs have been forced."

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