On Thursday, the Securities and Exchange Commission issued a sample format for the mutual fund prospectus profile it has proposed requiring fund companies to send to investors. The three- or four-page document would be in the front of every prospectus. In addition, fund companies would have the option of sending the shorter form to investors and making the longer version available on their website or in hard copy, upon an investor’s request.
It includes the most important information on a fund: investment objectives, costs, principal investment strategies, risks, performance, top 10 portfolio holdings, the identity of the investment advisory firm and portfolio managers, and information about broker compensation and conflicts.
“In three or four pages, an investor could get the important facts about a mutual fund in a quick and convenient way,” said SEC Chairman Christopher Cox. “Instead of digging through pages of legalese, investors would be able to spend more time learning how their money is invested and making informed investment decisions.”
The SEC is asking investors what improvements they would suggest that would make it easier to read and understand mutual fund prospectuses, as well as whether the information that we propose to include in the summary section of the prospectus the information that they need to make an informed investment decision.