Petite Prospectus?

April 2, 2007

Chuck Jaffe reports on the mutual fund industry's efforts to reduce the size of the distributed fund prospectus:

If you buy a computer, the "quick-start guide" helps you get the equipment up and running without forcing you to learn many of the fine points that may or may not be useful information some day.

The powers behind the mutual fund business want you to get the same kind of jump start when it comes to their products.

Paul Schott Stevens, president of the Investment Company Institute, the trade association for fund companies, called for big changes in fund disclosure this week, specifically suggesting that investors would be better served by ditching the traditional prospectus in favor of a jump-start user's manual, along with instructions on how to access the true prospectus on the Internet.

It's hardly a new idea, but there's one significant difference this time, namely that the Securities and Exchange Commission is receptive to the idea, and the fund industry powers are more anxious than ever to ease their paperwork burden."

LINK

We are, generally, in favor of the idea, assuming these slimmer documents contain the information investors need to make buy decisions. The data in a prospectus that is important to the vast majority of investors could fit on about a page and a half, and a standardized sheet that contains just these key points will make identifying quality funds easier. Could save a tree or two to boot.

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