An industry committee this week recommended new standards of advertising designed to halt misrepresentation of Ginnie Mae funds and other interest-earning mutual funds.

The proposal was made by the Investment Company Institute -- the trade association for mutual funds -- in response to concerns expressed by the Securities and Exchange Commission. The ICI has no regulatory powers, but president David Silver said he expected members would comply with the voluntary advertising standards.

Government National Mortgage Association President Glenn R. Wilson Jr. called the ICI recommendations "a heck of a good start. There was almost no interest in this a few months ago." Asked if the voluntary standards go far enough, he responded, "No one is obligated to educate the public in an ad. Potential buyers should consult their brokers."

Ginnie Mae funds are being asked to inform investors in easily readable type that the yield and share price of the fund will fluctuate, which means there is the potential for losing money. The ads will have to show the current net asset value of a mutual fund share, as well as the price a year ago.

The new rules would also require many Ginnie Mae funds to lower the interest rates they advertise by standardizing the way performance of funds is compared.

Ginnie Mae fund performance can be stated as yield or total return. The yield states how much money an investor will get in monthly payments as long as the investment is held. Total return shows how much an investor would get back if the fund is held for one year and then sold.

The ICI also presented a detailed formula for standardizing the yields on income funds so that investors can compare yields of similar funds, even though dividend distributions by the funds may vary. The ICI did not make any proposals for calculating total return.

The voluntary advertising standards proposed by ICI apply only to Ginnie Mae mutual funds and do not affect the advertising of whole Ginnie Maes.