Scott Gottlieb, CPA


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NEWS BYTES
November 2
008

From the SEC website

SEC Improves Disclosure for Mutual Fund Investors


The Securities and Exchange Commission today voted unanimously to improve mutual fund disclosure by requiring that funds provide investors with a concise summary — in plain English — of the key information they need to make informed investment decisions. The new summary prospectus will appear at the front of a fund’s prospectus.

The Commission also approved amendments to encourage funds to make greater use of the Internet so investors can receive more detailed information in a way that best suits their needs.

“Today’s action will help mutual fund investors more easily obtain the key information they need — such as the description of the fund’s investment objectives and strategies, fees, risks, and performance,” said SEC Chairman Christopher Cox. “The summary prospectus will quickly give investors a basic understanding of the fund and will permit them readily to compare one fund to another. Investors will also have access to more searchable information about mutual funds on the Internet — an important improvement in their ability to comparison shop.”

Andrew J. Donohue, Director of the SEC’s Division of Investment Management, added, “Many investors often find current fund prospectuses to be lengthy, legalistic and confusing. This mutual fund disclosure framework will provide information that is easier to use and more readily accessible, while retaining the comprehensive quality of the mutual fund information available today.”

Specifically, the Commission adopted the following improvements to mutual fund disclosure:

Summary Information at the Front of the Prospectus
The Commission adopted amendments to Form N-1A, the registration form for mutual funds, to require that every mutual fund include key information at the front of its statutory prospectus about the fund’s investment objectives and strategies, risks, and costs. The summary will also include brief information regarding investment advisers and portfolio managers, purchase and sale procedures, tax consequences, and financial intermediary compensation. Funds will be required to provide the summary information in plain English and in a standardized order.

New Prospectus Delivery Option for Mutual Fund Securities
The Commission adopted a new rule that permits sending a summary prospectus to satisfy prospectus delivery requirements provided that the mutual fund’s summary prospectus, statutory prospectus, and other specified information are available online. The summary prospectus must have the same information in the same order as the summary at the front of the statutory prospectus. In addition:

The online materials must be in a user-friendly format that permits investors and other users to move back and forth between the summary prospectus and the statutory prospectus. This will allow investors and others to efficiently access particular information that is of interest to them.

Investors have to be able to download and retain an electronic version of the information.

The statutory prospectus and other information must be provided in paper or by e-mail upon request so investors can choose the format in which they receive more detailed information.
The rule changes are effective on Feb. 28, 2009, and funds must begin complying with the form changes on Jan. 1, 2010. The full text of the Commission’s new disclosure requirements will be posted to the SEC Web site as soon as possible.

 

 

 

 

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