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Shorter Prospectuses May Be Coming

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The SEC will announce a proposal as the first agenda item at its open meeting on November 15 that would allow mutual fund companies to provide a “short-form” prospectus of as little as two pages to potential investors. The Commission’s intent is to “improve mutual fund disclosure” by having companies provide a “summary prospectus containing key information in plain English,” with more detailed prospectus information available to investors on the Web, according to the SEC.

Not surpisingly, this is a rule that the mutual fund industry favors. A Forrester Consulting survey of 150 fund companies sponsored by NewRiver Inc., an electronic document delivery firm, found that 95% of respondents would support the proposed rule, citing the reduced costs and streamlined communications with investors that such a rule would engender.