US Calls for Internet Funds Police By Jane Martinson Financial Times: Friday, October 3, 1997 A US securities regulator called yesterday for international co-operation on policing the sale of cross-border mutual funds on the internet. Douglas Scheidt, assistant director in the investment management division at the Securities and Exchange Commission, said: "Securities regulators around the world should work together to find an approach, and to find it relatively soon to satisfy the needs of everyone concerned." Fund managers, particularly in the US, are increasingly using the internet to market their products to investors around the world. This causes policing problems when potential customers in other countries are not covered by regulatory agreements. Regulations surrounding the cross-border sale of products are still vague. Mr Scheidt outlined his preferred approach to the issue at a meeting of the Federation Europeenne des Fonds et Societes d'Investissement, a body of leading European fund managers, in London yesterday. This approach would insist on the fund management group clearly stating the citizens it is allowed to sell to on its home page. Mr Scheidt suggested simple wording to the effect that only US investors were able to purchase US mutual funds, for example. This "disclaimer" would be combined with a demand on managers to screen out possible purchases from unauthorised countries. Mr Scheidt advocated a "flexible approach" which recognised that fund managers could be misled on the country of potential investors but insisted on proof that they had done everything possible to cut down on sales to citizens in unauthorised countries. A solution could be the use of gateways or passwords making it harder for potential investors to find information about a mutual fund. Mr Scheidt said the main drawback was the cost. He also discounted what he described as the "regulator's dream approach" of insisting on the "facts and circumstances" of every transaction. He felt that one of the most important virtues of these approaches was that they did not require any legal changes to enable the internet to be used as a marketing tool. He said his department was also keen to look at how fund managers marketed their products generally to potential clients on the internet. Changes to products must be sent separately via e-mail or the post. --- Dr.Dimitri Vulis KOTM Brighton Beach Boardwalk BBS, Forest Hills, N.Y.: +1-718-261-2013, 14.4Kbps