Compliance April 4, 2005

NASD: Require Internet Disclosure of Mutual Fund Point of Sale Information

April 4, 2005 (PLANSPONSOR.com) - The NASD is recommending that the Securities and Exchange Commission (SEC) mandate Web-based disclosure of mutual fund point of sale information through a new "Profile Plus" system.
Reported by

>The SEC has proposed a rule that would create point of sale and confirmation requirements in mutual funds, college savings plans and other securities, according to NASD. To make this process more user-friendly and accessible, NASD is proposing that information on such investments be put on the  two-page platform , which requires basic information such as risks, performance, fees and expenses, and information on possible conflicts of interest.

>Also recommended by a NASD taskforce  report   – supported by NASD Chairman and CEO Robert Glauber in a comment letter – is that all broker-dealers be required to post Profile Plus for each mutual fund they sell on a Web site, with access to a fund’s prospectus and possible conflicts of interest. NASD also believes investors should be allowed to request a paper copy of such information.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“The SEC proposal is an excellent effort that properly focuses on getting more, better and clearer information to investors at the most important time – prior to purchase. Good point of sale information is crucial for investors and Profile Plus would build on the SECs proposal by adding information about investment risks, objectives and performance – three of the most important things investors need to consider when purchasing a mutual fund,” Glauber said in his  letter .

>The recommendations were the result of a focus group/task force, chaired by Glauber, that aimed to aid the SEC in its proposed rules on mutual fund disclosure.

>In its report, the NASD task force also recommended that the SEC:

  • update and modernize the findings that a fund board must make in approving and continuing a Rule 12b-1 plan
  • list Rule 12b-1 fees in the prospectus fee table solely in a manner that describes their purpose without reference to a rule number that may be confusing to many investors
  • mandate better disclosure to investors about the costs of Class B shares and, along with NASD, consider other regulatory issues concerning Class B shares.
  • reconsider the unified fee proposal previously set forth by the SEC staff.

«