Administration September 11, 2004

NASD Wants Fund Expenses Disclosed With Performance

November 21, 2003 (PLANSPONSOR.com) - If securities regulator NASD gets its way, mutual fund companies will give the same prominence to their funds' expenses as they do when touting their investment performance.
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According to a news release, the NASD has proposed a new rule requiring all fund advertisements, sales material and correspondence that includes performance information to also feature a prominent text box with the fund’s:

  • standardized performance information (i.e., one, five, and 10-year returns)
  • maximum sales charge
  • annual expense ratio.

The proposal would require that the standardized information in the text box be presented in at least as large type size as the nonstandardized performance.

The announcement said the proposal is designed to improve investor awareness of mutual fund costs, facilitate comparisons among funds and make standardized performance more prominent. 

“Mutual fund fees and expenses affect an investor’s return.  When a mutual fund promotes its performance, it needs to give a balanced picture by disclosing fees and expenses,” Robert Glauber, NASD chairman and CEO, said in a statement. “With the balanced information mandated under our proposal, investors have a better chance to make the right mutual fund purchase decision.

NASD’s heightened scrutiny in the area of mutual funds and variable annuities has resulted in over 200 disciplinary actions since the beginning of 2001, according to the announcement. The regulator will be inviting public comment on its proposal, the news release said.

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