Common standards that prevent mutual fund managers from ?cherry picking? their best results when advertising their funds to the public are on their way, according to a panel of experts at a conference yesterday.

And organisations such as IOSCO (International Organisation of Securities Commissions), the Financial Services Authority (FSA) in the UK and the Securities and Exchange Commission (SEC) in the US are paving the way for global best practice standards to be established.

This issue was examined in a panel discussion yesterday at the last session of the 15th annual Globalisation of Mutual Funds Conference yesterday at the Southampton Princess Hotel.

According to the panel, what is driving the desire for past performance data presented to the public to be calculated in a more standardised way is the fact that mutual fund customers generally rely heavily on this information when assessing and buying funds.

With investor protection in mind, the regulators want to set standards that encourage a fair and accurate representation of a fund?s performance when it is marketed to the public, whether in prospectuses or in all forms of advertising.

?Obviously investors could be misled if they can?t meaningfully compare a fund?s stated performance against others or if the published data only concentrates on good periods,? said Douglas Scheidt, associate director and chief counsel in the SEC?s Investment Management Division. ?An SEC technical committee focused attention on this issue over two years ago and some of the work that resulted from that helped IOSCO to develop general principles for the regulation of presenting fund performance in advertising.?

Those principles state that fund advertising should not contain false or misleading information; that performance information should be calculated from the viewpoint of the average investor, reflecting all fees payable by investors and expenses related to the fund; and that the information presented should be calculated using standardised formulas.

This approach is very similar to that developed in the new FSA Financial Promotion Rules which are due to come in to effect in the UK at the beginning of June.

?The FSA?s goal is to make sure information presented to mutual fund investors is clear, fair and not misleading,? said Sara MacIntosh, chief counsel for Franklin Templeton Investments Europe.

?The new rules give guidance on what should comprise standardised information, such as listing discrete annual returns over a set period [five years, which they hope will prevent fund managers from cherry-picking data to omit any low-performance periods,? she added.

The rules were developed after extensive industry consultation and consumer research by an FSA task force specifically set up to review performance and reporting issues in the mutual funds industry.

The rules apply to all promotional literature and advertising of funds that feature performance details, including ads in the broadcast media and on the Internet, but do not affect face-to-face selling. According to Ms MacIntosh the general view is that the overall principles of the new fund advertising rules could be adopted by all segments of the financial services sector.

With respect to continental Europe, BaFin the German federal financial services regulator is a member of the IOSCO technical committee that drafted the principles for past performance data presentation.

?BaFin is likely to use those standards in developing guidelines for the German funds market,? said Marietta Lienhard, a partner at the Frankfurt office of law firm Freshfields Bruckhaus Deringer.

?And there have already been significant actions taken to try and address this issue across Europe,? she added. ?The UCITS Undertaking for Collective Investments in Transferable Securities) directive on harmonisation of performance presentation standards is one example, which also is part of their wider goal to establish a single European investment funds market.?

UCITS also hopes the challenges to multi-jurisdictional advertising in Europe that currently exist can also be addressed.

?Right now fund managers have to comply with advertising rules that apply in each individual country in which they are offering funds, as well as their own country,? said Ms Lienhard. ?This is prohibitive to encouraging cross-border marketing.