The Investment Company Institute (ICI) is encouraging the Securities and Exchange Commission (SEC) to create a summary shareholder report for investors.
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ICI, in a comment letter to the SEC, said an optional summary shareholder report would make it easier to understand and help shareholders compare funds. The summary shareholder report should include performance highlights, total return, expenses, portfolio holdings, liquidity risk management information, and instructions on how to access the full shareholder report.
ICI created a prototype of the summary shareholder report and surveyed more than 1,200 mutual fund shareholders about it. ICI found that more than 90 percent of these mutual fund investors said the prototype summary report was enough to help them stay informed. The same percentage said it made it easier to compare funds and said they would be more likely to read the summary than current reports.
“We applaud the SEC for its recent efforts toward modernizing fund disclosure,” ICI General Counsel Susan Olson wrote in a comment letter. “ICI looks forward to working with the Commission as it takes the needed steps toward improving the fund disclosure experience for all investors. Investors benefit from clear, concise disclosure of key information and we believe a structured summary shareholder report, with access to more detailed information, would help shareholders make well-informed decisions, including comparing funds.”
In the letter, ICI also suggested that the SEC modernize the delivery of fund prospectuses to provide firms with the flexibility to choose to send investors a notice informing them that a summary prospectus or a full-length prospectus is available. This will result in significant cost savings for fund shareholders and align with shareholder preferences.
ICI also told the SEC that customized calculations of fund expenses should not be compulsory. Requiring individualized expense information would be logistically complex and very costly. Also, they say they are unnecessary because of calculators and other resources already available for investors.
Further, ICI believes that risk ratings are unnecessary and could do more harm than good, as risk is inherently complex and multifaceted. ICI is urging the SEC to neither mandate nor create standardized risk measures or risk ratings. They said current fund disclosures adequately depict risks associated with investing in the fund.