Funds' phones are jingling, and the SEC cocks an ear

The phones are jingling continually these days at US mutual fund companies -- and that makes the industry downright happy. "I have a staff of 11 full-time people who answer our phones, and on some days we're completely wiped out from the heavy volume of calls," says Sharon Krieger, assistant vice- president of T. Rowe Price Associates, in Baltimore.

What Mrs. Krieger oversees are seven incoming 800 "WATS" lines for the T. Rowe Price family of mutual funds.

By dialing the 800 toll-free number from anywhere in the United States, a prospective purchaser of T. Rowe Price funds can quickly get an answer to a range of basic questions about mutual funds, including the difference between types of funds and how to get a prospectus, as well as current yields and prices on various funds.

The toll-free 800 system is used by such families of funds as Scudder Fund Distributors, the Dreyfus Corporation, the Vanguard Group, the Fidelity Group, and many others. The phone lines bring potential purchasers into contact with the funds or their representatives.

Demands on the the toll-free numbers have become so heavy in the past year or so that the watchdog Securities and Exchange Commission (SEC) recently made a brief inquiry into the practice, after repeated complaints that lines were constantly busy and that it was difficult to get through.

The main focus of the cursory SEC review was on money-market mutual funds -- currently the best-selling segment of the industry. But the inquiry indirectly touched on the larger issue of the 800 lines themselves.

"Not all funds, we've found, have problems with overcrowded lines," an SEC official says. "But some firms definitely do. They're now taking action to alleviate that problem."

The official says the commission will continue to look now and then at the 800 lines as part of its larger review of funds. But any comprehensive effort to impose regulations on how the lines are operated, another SEC official says, would run into difficult questions of freedom of speech. Now, however, it is assumed that erroneous information presented on the 800 lines would come under federal antifraud laws.

Questions on most WATS lines tend to run over a broad range of issues. Some typical inquiries:

For the Dreyfus Corporation: "If I buy into the Dreyfus Tax Exempt Bond Fund, will I be subject to state income taxes in Virginia?" Answer: "Yes."

For Vanguard/Whitehall Money Market Trust: "What is the minimum amount that I can write on your free check-writing privilege for the Whitehall money-market trust?" Answer: "The check must be for at least $500. But the initial required investment to invest in the trust itself is $3,000."

For T. Rowe Price: "Which of your funds is the safest from an investment standpoint?" Answer: "The objective of the Rowe Price Reserve Fund is the preservation of principal."

Fund officials, conscious of some public indignation about clogged lines and often cursory answers, are taking steps to ensure that telephone personnel are as sophisticated as possible about financial matters.

At T. Rowe Price, for example, most of the 11 permanent telephone personnel are college graduates. And even the eight temporary personnel have solid academic credentials, including three with master's degrees and one doctoral candidate.