November 20, 2008

SEC Okays Summary Prospectus

But Commission shelves vote on credit ratings agencies until December 3

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The Securities and Exchange Commission has put off until December 3 a vote on adopting rules that would curtail conflicts of interest among credit ratings agencies. The rule on credit ratings agencies was pulled from the SEC's November 19 open meeting agenda. However, at the meeting the SEC did approve its summary mutual fund prospectus.

In explaining why a vote on the credit ratings rule was postponed, SEC Chairman Christopher Cox said the Commission originally "had planned to spread the consideration of the credit rating agency rules over two meetings, since that is the way we proposed them, but the Commissioners and the staff have agreed that the best way to proceed is to do the entire package of rules in one meeting." The SEC, he said, "will return to vote on those rules in exactly two weeks. This rulemaking remains a high priority for the Commission."

The new summary prospectus requires 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 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 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."

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