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Regulation and Compliance > Federal Regulation > SEC

NAPFA to SEC: More consumer education needed

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One of the primary roles of the Securities and Exchange Commission is to protect investors. The National Association of Personal Financial Advisors is encouraging the SEC to make disclosures easier to understand.

Since 1983 NAPFA, the leading association of fee-only comprehensive financial advisors, has been a vocal leader on the need for the financial services industry to be proactive in educating consumers.

As part of the SEC’s “Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies (S7-28-07),” NAPFA put forth the following requests in formal comments submitted to the SEC February 28, 2008:

  • The Summary Prospectus must be written in “plain English” to make the contents of the disclosure easy to understand;
  • The SEC more fully support the application of the Investment Advisors Act of 1940 to promote the application of a fiduciary standard;
  • A Summary Prospectus must provide a real example of how fund fees and costs impact investment returns;
  • A Summary Prospectus must outline how sales loads impact investment returns;
  • A Summary Prospectus must require disclosure of surrender fees and redemption fees; and
  • A Summary Prospectus must provide for disclosure of transaction and other costs within the fund(s).

“The SEC has always relied on the use of disclosures to protect consumers, but this practice has not been successful in educating consumers on the real cost of investing,” said Thomas A. Orecchio, national chair of NAPFA. “We believe for disclosures to work they must be presented in a way that consumers will understand and they must disclose everything – every fee, every charge, every cost.”

- Benjamin Lewis
Perception, Inc.


On page 42 of our March issue, in our Out & About section, our headline should have said “Alpha & Omega’s Poteet receives the Olson cup.”


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