NASD chairman Robert Glauber announced the formation of a task force aimed at finding ways to make mutual fund costs and distribution arrangements more transparent.

The creation of the Mutual Fund Task Force, announced Wednesday in Baltimore, is the product of discussions between the NASD, the U.S. association that regulates securities dealers, and the Securities and Exchange Commission. It comes in response to requests for comment by the SEC on ways to improve disclosure of mutual fund costs and distribution arrangements.

The members of the task force will represent a cross-section of the broker-dealer and mutual fund communities. Plans are for task force members to be appointed and begin work by the end of June.

The work of the task force will proceed in two phases. First, it will consider mutual fund portfolio transaction costs, including directed brokerage arrangements, soft dollars and disclosure. The task force will report back to the SEC in the next several months.

In the second phase, task force members will focus on distribution arrangements, including 12b-1 fees (similar to trailer fees) and revenue sharing. This phase will also include a comprehensive review of mutual fund distribution.

“Looking at mutual funds themselves and the practices used to sell them, a major part of the solution to the appalling abuses of the public trust we’ve seen recently is increased transparency,” Glauber said in a speech at the 2004 NASD Spring Securities Conference.”

“I have a fundamental belief that more information is better than less,” Glauber said. “One of the bedrock principles of our free market system is that all participants have access to information about prices and costs that will influence their decisions. When this information is hidden or distorted, investors are not able to make the best-informed decisions about where to invest their money.”

“I believe the mutual fund industry’s own self-interest will be served by better disclosure of costs and fees and payments for distribution, as well as better governance of the funds themselves,” Glauber said. “These changes will help the industry retain its customers and attract new ones.”