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News March 28, 2005 Issue

Fund Companies Scramble to Fix Account Number Leakage

Did you see the March 23 front page Wall Street Journal story revealing that some mutual funds had published account numbers and home addresses of their five percent shareholders in the fundís SAIs, which are publicly available on Edgar? The fund industry certainly did, and was scrambling last week to fix the damage.

One lawyer reported that funds were calling their transfer agents and shareholder servicing agents and asking them to quickly change the account numbers of shareholders who had been listed on the SAIs. That seems to be the right approach: "The most effective safeguard of the investor information in this situation is to change the account numbers," said an SEC spokesperson.

Some firms made 497 filings to erase the account numbers in current SAIs. For example, on March 23, PIMCO, one of the fund groups listed in the Journal article, filed a new and improved SAI that replaced line items containing account numbers. Of course, thatís only a partial fix, since it does not retroactively erase account numbers provided in past SAIs. On that score, fund lawyers last week were looking at ways to systematically go back and "redact" past SAI filings.

The lawyer noted that the disclosure of home addresses presented less of a concern, since addresses are clearly required by Form N-1A, and Reg. S-P provides an exception for information required by law.