SEC seeks comments on improving mutual fund ad disclosures for investors

<p>WASHINGTON – The SEC has proposed rule amendments intended to encourage mutual fund advertisements to convey more balanced information to prospective investors, particularly with respect to past performance. The Commission’s concerns that mutual fund advertising could mislead investors or create unrealistic expectations were heightened when many funds engaged in advertising campaigns that highlighted their impressive performance during the period of extraordinary market returns in 1999-2000. The amendments proposed would: require fund advertisements that contain performance information to include disclosure that past performance does not guarantee future results and that current performance may be lower or higher than the performance quoted; require fund advertisements to include disclosure that would direct investors’ attention to a fund’s charges and expenses; require more prominent disclosure in fund advertisements of important information, such as the dates during which quoted performance occurred; reemphasize that fund advertisements are subject to the antifraud provisions of the federal securities laws; require funds that advertise performance to make available, by a toll-free or collect telephone number, returns that are current to the last day of the previous calendar month Comments on the proposed rule amendments are due by July 31, 2002. The SEC is also encouraging suggestions for alternative methods for regulating fund advertisements that could improve the quality of information that is provided to investors.</p>