The Securities and Exchange Commission voted unanimously to formally propose that mutual fund investors get access to key information about fees, performance, and strategies through interactive data, which would permit comparison shopping among thousands of funds with all the ease of conducting an Internet search.
The SEC’s proposal would require funds to label data in their public filings using computer tags similar to the bar codes that identify products at stores or packages in the mail. The labeling would allow investors to instantly access and compare investment objectives and strategies, risks, performance, and costs for more than 8,000 mutual funds at the click of a mouse.
“This exciting new technology will enable investors to instantly analyse and compare not just two or three mutual funds, but hundreds or even thousands, and to quickly focus on the particular funds that are right for them,” says Christopher Cox, chairman, SEC. “Investors will no longer need to wade through lengthy documents to find the relevant details needed to compare funds one at a time.”
“This proposal would, if adopted, create an interactive database of key mutual fund information that will enable investors to more easily analyze and compare cost, performance, and other key information across the more than 8,000 available mutual funds. Together with the Commission’s recently proposed summary prospectus, this proposal has the potential to transform information access for mutual fund investors,” says Andrew J. Donohue, director of investment management, SEC.
Mutual funds already have been submitting information to the SEC in interactive data format on a voluntary basis. The SEC’s rule proposal would require all mutual funds to provide data-tagged information beginning with registration statement filings that become effective after 31 December 2009. A mutual fund also would be required to post the interactive data on its Web site, if it maintains one.
Mutual funds seeking a head start on data tagging can participate in the SEC’s voluntary program for the submission of interactive data. When the SEC’s interactive data pilot program began in 2005, it initially covered the financial statements of corporate filers. The program was expanded to cover key mutual fund information in August 2007.
Investors can give mutual fund interactive data a “test drive” by using the Mutual Fund Reader on the SEC Web site to analyse and compare visual charts and graphs of key mutual fund information that has been voluntarily submitted using data tags.
Last week, the SEC proposed a similar rule to help investors by requiring public companies to provide financial information using interactive data beginning next year for the largest companies and within three years for all public companies.
Public comment on the SEC’s proposed rule should be received by the Commission no later than August 1.