Gary Gensler is Chair of the U.S. Securities and Exchange Commission. This post is based on his recent statement. The views expressed in this post are those of Chair Gensler, and do not necessarily reflect those of the Securities and Exchange Commission or its staff.
Today, the Commission is considering final rules to update the Names Rule. I am pleased to support this rule adoption because it will help ensure that a fund’s portfolio matches a fund’s name. Such truth in advertising promotes fund integrity on behalf of fund investors.
The Names Rule reflects a basic idea: A fund’s investment portfolio should match a fund’s advertised investment focus. In essence, if a fund’s name suggests an investment focus, the fund in turn needs to invest shareholders’ dollars in a manner consistent with that investment focus. Otherwise, a fund’s portfolio might be inconsistent with what fund investors desired when selecting a fund based upon its name.
In crafting the federal securities laws, Congress understood the importance of how funds describe themselves—including through the names they choose. Thus, in the Investment Company Act of 1940, Congress included fund naming provisions. In 1996, Congress amended these provisions to authorize the Securities and Exchange Commission to define registered investment company names as “materially deceptive or misleading.”[1]
