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.
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>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.

“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.

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