The Securities Industry and Financial Markets Association (SIFMA) today filed a comment letter in support of most aspects of the Securities and Exchange Commission’s (SEC) enhanced disclosure and new prospectus delivery option, which could change how millions of informational documents will be delivered to mutual fund investors each year.
“Too often important financial information is buried under an avalanche of complicated, legalistic language required by governments or lawyers. Reforming the content and delivery of the mutual fund prospectus creates a simple, short, clear and concise standard written in plain English. It will go a long way toward helping millions of investors better choose and understand their financial holdings. The SEC deserves praise for both addressing this issue and the process it undertook reviewing and incorporating the recommendations of numerous industry and consumer groups early in the development of the proposal,” says Ira Hammerman, senior managing director and general counsel, SIFMA.
The goal of the summary prospectus is to provide a concise, informative, user-friendly document. It would contain seven categories of information most important to investors, including: investment objectives, costs, strategies and risks, among others.
But, SIFMA, in a joint letter with the Investment Company Institute (ICI), did raise objections to the SEC’s proposal that a summary prospectus include quarterly updates of performance and portfolio holdings. Requiring quarterly updates would reduce the industry’s incentive to utilise the summary document, due to the significant administrative and operational burdens it would create.
In its own letter, SIFMA argues that the rule could create confusion for investors because of content differences between the summary and statutory prospectus the latter does not include quarterly update information. SIFMA also noted that this information is readily available elsewhere, including on the Internet.