Securities Industry Association: Point-Of-Sale Disclosure Should Give Investors ‘The Complete Picture’ On Fund Choices, Be Internet-Based, Cost-Effective - Supports NASD “Profile Plus” As Effective Vehicle For Disclosure

The Securities Industry Association today reaffirmed its strong support for clear, efficient, and cost-effective disclosure of information to investors. In its comment letter on the Securities and Exchange Commission’s rule proposal on point-of-sale disclosure for mutual funds, SIA cited the NASD Mutual Fund Task Force’s Profile Plus proposal as an effective model for delivering via the Internet the information mutual-fund customers need to make informed decisions about their investment choices.

While sharing the SEC’s goal of improving point-of-sale disclosure for investors, it is SIA’s view that the commission’s proposal does not provide investors with enough information to make a reasoned decision about whether to invest in a mutual fund. In addition, SIA argued that the SEC proposal’s requirement of paper disclosure documents would make the process both cumbersome and costly.

“Investors should have point-of-sale disclosure that is timely, inexpensive, and that provides them with the complete picture – both the costs and potential rewards associated with the investment choices they consider,” SIA Senior Vice President and General Counsel Ira Hammerman said. “This information should be presented in a clear, concise format, and be written in language that investors can readily understand. The Internet is a perfect vehicle for handling this job, which is one reason why SIA believes the NASD’s Profile Plus option provides an optimal solution for point-of-sale disclosure.”

The Profile Plus proposal, SIA said, would give investors the information they need in a format that is easily accessible. The Internet-based Profile Plus would provide investors with a two-page, easy-to-understand document that includes key characteristics of the fund, and all related fees and expenses, including the costs and potential conflicts associated with mutual-fund distribution. (The NASD Task Force Report is available at: http://www.nasd.com/web/groups/rules_regs/documents/rules_regs/nasdw_013690.pdf )

In its response to the reopening of the comment period on the SEC’s rule proposal, SIA noted that the commission had considered suggestions made in an earlier SIA letter on how to make the information available in a way that is cost-effective for the investors who must ultimately bear the cost of these new regulations. SIA also called on the SEC to formally re-propose the rule, rather than merely “reopen the comment period,” and to include the actual regulatory text, cost-benefit analysis, and analysis of the effects of the proposal on small businesses.

SIA’s comment letter is available at http://www.sia.com/2005_comment_letters/5802.pdf.