A Government move aimed at protecting the privacy of mutual fund investors could be criticised for being out of line with United States regulations.

The Companies Amendment Act 1995 -- due to be debated in the House of Assembly today -- removes the requirement for the register of members of mutual funds companies to be open to inspection.

Advocates of the bill say it protects the privacy of mutual fund investors.

The registers, a list of a mutual funds unit holders, will be accessible by Government, the Bermuda Monetary Authority (BMA) and other inspectors but the purpose of this provision is to protect the privacy of investors, said Finance Minister the Hon. David Saul.

Asked if the clause would enable money launderers to invest in the funds without detection, he said: "It is up to money managers not to let them in.'' Dr. Saul said he believed the US would change its position allowing a unit holder access to US mutual fund registers.

"I do intend to ask the Minister of Finance to give a solid reason why this change is necessary,'' Bermuda's Shadow Finance Minister Mr. Eugene Cox said yesterday.

"It does seem to deviate from what one would normally expect.'' But he said he understood the need for a degree of investor privacy.

In the public eye, investors might be telemarketing targets.

But supporters of open registers say they might learn of mismanagement by the fund's manager.

With an open register policy, money managers could "raid'' other mutual funds to woo investors.

Recently in Bermuda, a money manager allegedly used a mutual fund register to inform investors they were being misled by their mutual fund's manager, one of the Island's banks.

Another example involved freelance journalist Mr. George Rushe who earlier this year failed in his attempt to view the register of Trout Trading after a Bermuda Supreme Court ruling.

Mr. Rushe has not disclosed why he wanted to see that register.

"If this bill is passed, for mutual funds, the register will be closed forever. Some say this will create a golden opportunity allowing money to be laundered in Bermuda in complete secrecy,'' he said.

Closing mutual fund registers could damage Bermuda's "blue chip'' image by giving money launderers anonymity, he added.

"It is going to give Bermuda a stigma.'' There must be some mechanism of register disclosure to protect the investor, said Bermuda Investment Advisory Services president Mr. Robert Pires.

"We must always be cognizant of what is in the best interest of the investor.

And the answer is information. If a mutual fund manager is withholding essential facts from unit holders there has to be some mechanism to allow the unit holders to be properly informed,'' he said.

"Why is the local establishment concerned about keeping registers closed?'' If the register is closed it puts more power in the hands of the investment manager, said Mr. Pires.

"I am not averse to closing mutual funds' registries but a unit holder should be able to get a list of other investors,'' he said.

"If the bill is passed, it appears there will be less public access in Bermuda than in the US,'' said Mr. John Collins, spokesperson for the Investment Company Institute (ICI), the mutual trade association of the US mutual funds association.

The ICI is a major US mutual funds database funded by the American mutual fund industry.

In October of 1992 the US Securities and Exchange Commission (SEC) changed its rules to allow shareholders access to mutual fund registers in which they were investors.

This allows a dissident investor to contact other investors.

But it took 52 years before this rule was included in the US mutual fund regulatory regime, said Mr. Collins.

Kirkpatrick & Lockhart partner Ms Dana Platt said under most US state laws, a copy of the share register can be obtained by another shareholder.

"Shareholders may want to change the board of directors,'' she said.

But the requirement for obtaining the register is far from onerous as all one has to do is buy one share, she said.

Ms Platt, a partner with the Washington D.C. law firm, specialises in mutual funds law.

"The mutual fund could still provide a list of investors but if the bill is passed it will no longer be required to,'' said BMA manager investment services division Mr. Peter Sousa.

"There could be competitive reasons for closing the register,'' he said. "It seems unreasonable to allow the register to be open for anyone to view it,'' he said.

He believes the US and UK have a similar environment where mutual fund registers are closed.

"The standards of disclosure in Bermuda are generally very good,'' he said.

Though registers could be closed, Mr. Sousa said speculation that company registers would be the next target was unfounded.

The bill, up for second and third readings today, was one of four bills tabled in the House of Assembly two weeks ago by Dr. Saul.

As well as the Companies Amendment Act 1995, which includes the mutual fund provision, three other bills were due for second and third reading today; the Overseas Partnerships Act, the Overseas Partnerships Act and the Exempted Partnerships Amendment Act 1995 and the Mutual Companies (Non-application Companies Act) Regulations 1995.