Magazine article American Banker

Trade Group Beating the Drum for Shorter Fund Prospectuses

Magazine article American Banker

Trade Group Beating the Drum for Shorter Fund Prospectuses

Article excerpt

Declaring a test-run a success, the Investment Company Institute on Monday formally asked the Securities and Exchange Commission to adopt a vastly simplified version of the much-maligned disclosure document known as a prospectus.

The mutual fund trade group announced the proposal Tuesday at its annual membership meeting here. If the SEC eventually proposes and adopts a rule change in response, as many observers expect, investors could someday buy fund shares after reviewing a prospectus as short as four pages.

The quest for a shortened prospectus, known as a profile, follows testing begun last August by eight fund companies - including the Bank of America and Mellon's Dreyfus Corp.

"Our research is still under way ... (but) there's a broad acceptance by our brokers," said Debra McGinty-Poteet, managing director of mutual funds at Bank of America. She said that although the proposal would not lead to any cost savings, it's "a positive thing for disclosure" and worth pursuing.

The institute bolstered its plea to the SEC with research it conducted that showed half of more than 1,000 recent mutual fund purchasers questioned had not consulted the standard prospectus before buying. The research also showed that 61% of those investors who did not use the traditional document to guide their recent fund purchases said they would be very likely to use the profile prospectus, if it were available.

"Research doesn't indicate that the profile prospectus is a perfect document for everybody," said Paul Stevens, the investment institute's general counsel. …

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