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Wednesday, December 8, 2021

SEC amends fund advertising rules: Proposes new rules for fund of funds investments


Date: Thursday, September 25, 2003

The Securities and Exchange Commission has unanimously approved amendments to mutual fund advertising rules, and new rules and amendments for fund of funds investments. The commission adopted rule amendments that are designed to encourage mutual fund advertisements that convey more balanced information to prospective investors, particularly with respect to past performance. The amendments address concerns that, especially in times of strong market performance, some funds may use advertising techniques focusing on past fund performance that may create unrealistic investor expectations or may mislead potential investors. The new amendments require funds that advertise performance to make available returns that are current to the most recent month-end by a toll-free or collect telephone number or on a Web site. Fund advertisements will be required to identify this telephone number or Web site where an investor can obtain month-end performance information. The amendments also will 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. Fund ads will also need to include disclosure that would direct investors' attention to a fund's investment objectives, risks, and charges and expenses, in order to address concerns that this important information about a fund may be overshadowed by fund advertising that is focused on past performance. As well, adds for mutual funds will need to show more prominent disclosure of important information, such as the dates during which quoted performance occurred. Mutual fund companies will have to comply with the new advertising rule amendments beginning March 31, 2004. The SEC also proposed new rules and amendments to do with funds of funds that would codify exemptions from the existing rules that are designed to curtail abuses associated with pyramiding schemes. If adopted, these rules would give funds greater flexibility to invest in other funds without having to obtain an exemptive order from the commission in circumstances that do not create risks for the fund or its investors. The SEC is soliciting comment on the fund of funds proposals until December3. http://www.sec.gov/news/press/2003-122.htm