New Rules Reduce Jargon, Simplify Prospectuses

Points to be included in new summaries of mutual fund prospectuses, called profiles, and in revamped prospectuses themselves:

Profiles:

Are optional for mutual funds. Investors have the choice of buying into a fund on the basis of the profile or requesting the full prospectus document before making a decision.

Will provide a summary of key information on a fund, including investment strategies, risk, performance and fees charged to investors, in a clear and concise format.

Also will include information on the fund’s investment adviser and portfolio manager, purchase and redemption procedures, tax requirements and investor services.

Revamped Prospectuses:

Will include clear information in plain English on a fund’s investment objectives, strategies, risk, performance and fees charged to investors.

Must disclose the risk of the fund’s portfolio as a whole, rather than giving detailed, technical descriptions of the risks of individual securities that the fund holds.

Risk-Return Summaries:

Will appear at the beginning of all prospectuses and as part of all profiles, disclosing a fund’s investment objectives, strategies, risk, performance and fees in a comparative format.

Will include: a concise description of a fund’s overall risks; a bar chart showing a fund’s 10-year annual returns; an improved table showing fees.