Academic journal article Journal of Accountancy

SEC Seeks Comments on Proposals for Risk Disclosure

Academic journal article Journal of Accountancy

SEC Seeks Comments on Proposals for Risk Disclosure

Article excerpt

The Securities and Exchange Commission invites comments and suggestions on a range of proposals on mutual-fund risk measurements. The SEC said its focus on risk disclosure was prompted by the unprecedented losses among certain short-term government bond funds in 1994.

The SEC concepts release, Improving Descriptions of Risk by Mutual Funds and Other Investment Companies, says mutual funds typically provide only the most general information on risk levels. The SEC has encouraged funds to modify their existing disclosures to enhance investor understanding of risks. "The SEC believes that it is now appropriate to explore whether SEC disclosure requirements should be revised in order to improve the communication of fund risks to investors and increase the likelihood that investors will readily grasp the risks of investing in a particular fund before they invest," the release says.

The release asks for comments on a number of general topics related to quantitative risk measures including

* The benefits derived from quantitative measures versus costs and burdens.

* Quantitative measures currently used by fund managers to assess risk and the availability of quantitative risk information from third-party providers such as the financial press or rating services.

* Investor understanding of quantitative measures of fund risks.

* Standardizing ways funds calculate quantitative measures of risks. …

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