Problem Children?

Open-end investment trusts are the wonder children of the securities industry. In ten years, their assets have jumped from less than $500 million to almost $2 billion. But as the children grew, the Securities & Exchange Commission thought that some of them had picked up bad habits. Three months ago, SEC got together with leaders in the investment company field, for a heart-to-heart talk about the selling methods of some of the funds' underwriters and dealers. Some of them, complained SEC, were advertising their shares as "guaranteed by the Government," "like a bank deposit," or "better than savings bonds." Some dealers, said SEC, were switching customers from fund to fund presumably for the sake of the high sales commissions.

The industry leaders decided that a program of self-regulation was needed, formed a subcommittee of the National Association of Securities Dealers to do the job. Last week, the N.A.S.D. started work on a mutual fund policing code, backed up with the power to levy fines and to suspend or revoke N.A.S.D. membership.

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