Friday, November 21, 2008

Fund Disclosure, Money Market Redemption Rules Adopted

The SEC adopted rule amendments designed to improve mutual fund disclosure by providing investors with a summary prospectus containing key information in plain English in a clear and concise format, and by enhancing the availability on the Internet of more detailed information to investors. The commissioners also adopted related amendments to Form N-1A dealing with exchange-traded funds.

Under the amended rules, every mutual fund must include key information at the front of its statutory prospectus about the fund’s investment objectives and strategies, risks, and costs. The summary will also include brief information regarding investment advisers and portfolio managers, purchase and sale procedures, tax consequences, and financial intermediary compensation. Funds will be required to provide the summary information in plain English and in a standardized order.

The SEC also adopted a new rule that permits sending a summary prospectus to satisfy prospectus delivery requirements if the mutual fund’s summary prospectus, statutory prospectus, and other specified information are available online. The summary prospectus must have the same information in the same order as the summary at the front of the statutory prospectus. In addition:

The online materials must be in a user-friendly format that permits investors and other users to move back and forth between the summary prospectus and the statutory prospectus and

Investors have to be able to download and retain an electronic version of the information. The statutory prospectus and other information must be provided in paper or by e-mail upon request so investors can choose the format in which they receive more detailed information.
The rule changes are effective on February 28, 2009, and funds must begin complying with the form changes on January 1, 2010. The text of the adopting release is not yet available.

The Commission also adopted an interim final temporary Investment Company Act rule and issued a request for comment concerning money market funds participating in a temporary guaranty program established by the Treasury Department.The guaranty program establishes a procedure for the orderly liquidation of money market fund assets in certain circumstances. Interim final temporary Rule 22e-3T will permit money market funds that commence liquidation under the guaranty program to temporarily suspend redemptions of their outstanding shares and postpone the payment of redemption proceeds. The rule is effective upon publication in the Federal Register and will remain effective until October 18, 2009, unless terminated earlier in connection with termination of the guaranty program.

The adopting release is available

The Commission postponed consideration of rule changes that would have imposed additional requirements on nationally recognized statistical rating organizations in order to address concerns about the integrity of their credit rating procedures and methodologies.