The Securities and Exchange Commission last week released a sample format for a proposed “summary prospectus” designed to improve mutual fund disclosure and make prospectuses easier for investors to understand. The proposal, which the commission on Nov. 15 voted unanimously to publish for public comment, would require mutual funds to provide a summary prospectus in plain English and in a format that follows the sample model it released last week, which includes seven required pieces of information, including investment objectives and costs, as well as the fund’s top 10 portfolio holdings. The proposal would also require mutual funds to provide the summary in both paper and electronic versions.SEC chairman Christopher Cox said the summary prospectuses would save lay readers from digging through pages of legalese in the full-length prospectuses and allow investors to easily compare one fund to another.“In three or four pages, an investor could get the important facts about a mutual fund in a quick and convenient way,” Cox said in a statement.If eventually approved by the commission, the proposal would essentially update the SEC’s current disclosure rules, which commissioner Paul Atkins described at a Nov. 15 commission hearing as a “cluttered attic” that was “impenetrable” to lay investors. In 1998, the SEC approved a proposal allowing funds to create a voluntary “profile” similar to a summary, but few companies have provided them because they do not want to be held liable for providing information that does not contain all the material that is included in full prospectuses.

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