Published by Reuters.

Thu Jan 24, 2008 5:25pm EST

BOSTON (Reuters) – Fidelity Investments will not be able to block shareholders demanding a vote to scrutinize the mutual fund giant’s investments for human rights violations, an activist group said on Thursday.

The U.S. Securities and Exchange Commission (SEC) earlier this week ruled that Fidelity, the world’s biggest mutual fund firm with $1.6 trillion in assets, could not exclude a shareholder proposal from its funds’ proxies, Investors Against Genocide said in a statement.

The proposal asks the boards of the funds to “institute oversight procedures to screen out investments in companies that, in the judgment of the board, substantially contribute to genocide, patterns of extraordinary and egregious violations of human rights, or crimes against humanity,” the statement said.

The proposal, which has been submitted in a coordinated effort by 24 different shareholders, has been filed with 28 Fidelity funds. It also targeted 30 funds run by Barclays Plc (BARC.L), Franklin Resources (BEN.N), T. Rowe Price (TROW.O) and Vanguard Group, it said.

“For the first time, mutual fund shareholders will have a voice in whether their savings are invested in genocide,” said Eric Cohen, chairperson of Investors Against Genocide, which is leading the shareholder action.

Cohen said he did not expect the proposal to initially win the vote in the mutual fund meetings but expected greater success eventually as more Americans grew aware of the issue.

Fidelity did not say what its future course of action will be but defended the move to try and disallow the proposal.

“Although the SEC staff has not concurred with our position, we continue to believe that the proposal deals with matters relating to a fund’s ordinary business operations and contains false and misleading statements,” Fidelity spokesman Vin Loporchio said.

“The SEC rules permit the exclusions of shareholder proposals if they meet those criteria,” he said.

Activists have been campaigning for two years now to get Fidelity and other mutual fund firms to divest their Sudan-linked holdings in protest against human rights abuses in that country.

They had targeted Fidelity and Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) over their holdings of PetroChina (0857.HK) because of the Chinese firm’s links to Sudan. Last year, Fidelity sold a big chunk of its PetroChina holdings and Buffett sold his entire holding.

(Reporting by Muralikumar Anantharaman, editing by Richard Chang)