MIAMI -- If the Securities and Exchange Commission truly aims to increase transparency within the mutual fund industry, it should stop requiring companies to deliver paper disclosure materials and encourage electronic innovations in shareholder communication, said Robert C. Pozen, chairman of MFS Investment Management.
"There is no more important issue before the SEC this year than Web delivery," Pozen said Monday, during his keynote address at the annual National Investment Company Service Association conference in Miami.
Regulators' focus on transparency and increased demands for reporting over the past few years have been good for the industry, but have failed investors, Pozen said. Rather than provide investors with the information they need, these increasingly dense tomes tend to bury the data they want, Pozen said.
"We can kid ourselves about people reading these documents," Pozen said. "Prospectuses are really good for weight lifting. Many investors want a really short summary -- one to three pages." But by the time all of the requisite disclosures and data are included, most swell to eight pages of hard-to-read "legalese and economicsese," he said.
"We need disclosure in a tiered way," and on-line delivery allows companies to present all of the required data in a more helpful format, Pozen told the audience.
"There are people who want more, and there are people who want less," he continued. Electronic documents can satisfy both without by embedding the information perceived to be more nuanced, or simply less important, through hyperlinks. So while the less sophisticated investor will quickly see the snapshot, those who care to click through can read the minutiae.
Not only would Web delivery help fund companies better increase transparency, but replacing hard copies of documents now, by law, sent to every shareholder--including those who have requested online documents--will save companies printing and mailing costs, too.
However, one challenge is getting investors acclimated, Pozen admitted. "This can be an opportunity for the industry to do education, but also to go further and to help people get access to PCs," said Pozen. Companies could donate computers to libraries, for example, he said.
Another challenge is the SEC itself, Pozen said. "The good news is that Chairman (Christopher) Cox, coming from California, is Web savvy," said Pozen, who described Cox's predecessor William H. Donaldson "averse to technology."