The SEC voted November 15 to adopt a short-form prospectus requiring that all mutual fund investors receive a clear, concise summary of key information needed to make an informed investment decision. The rule changes would also encourage funds to make their prospectuses available on the Internet, and are intended to enable investors to use and compare mutual fund information more effectively.
According to the SEC, the proposed rules to be published for comment include the following.
Summary Information at the Front of the Prospectus.
The proposal would amend Form N-1A, the form used by mutual funds to register under the Investment Company Act of 1940 and to offer securities under the Securities Act of 1933, by requiring every mutual fund to include key information in plain English in a standardized order at the front of the mutual fund statutory prospectus. Like the risk/return summary that is currently included at the front of every mutual fund prospectus, this summary would include a fund’s investment objectives and strategies, risks, and costs. It also would include brief information regarding top ten portfolio holdings, investment advisers and portfolio managers, purchase and sale procedures and tax consequences, and financial intermediary compensation. The proposed amendments would require that the summary information be presented separately for each fund covered by a multiple fund prospectus. This requirement is intended to assist investors in finding important information regarding the particular fund in which they are interested.