Prospectus Profiles Might Hurt Investors

Because of the proliferation of the Internet and its nearly universal use by fund investors, it is likely that fund companies will finally succeed in supplanting traditional mutual fund prospectuses with prospectus profiles, according to Dow Jones columnist Chuck Jaffe. A study by the Investment Company Institute found that 92% of fund investors have Internet access and 70% use it every day.

Thus, it’s almost certain that the Securities and Exchange Commission will allow fund companies to make Part I and Part II of fund prospectuses available online and to send investors the abbreviated version. Certainly, that would save the fund industry billions in mailing costs.

“Everyone seems to be on board, from the consumer groups to the SEC,” said ICI President Paul Schott Stevens. “I’d like to think we’ll see a formal proposal sometime this year, and that a final rule might be adopted not terribly long thereafter. Basically, it’s time. Most investors haven’t been reading the prospectus for a long time, so giving them a document that gets them up to speed and making the rest of the information [available online] makes sense.”

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.