Mutual Fund Disclosure

							Securities Industry Association




                                   Mutual-Fund Fee Disclosure
        Clarity is the cornerstone of trust between investors and their financial advisers.

        The Securities Industry Association is committed to clarity through full and unambiguous
        disclosure, enhanced understanding of the securities markets, and educating investors
        about mutual-fund fees.

        Research has shown that information about mutual-fund fees can be improved, particularly
        at the point of sale. Fee information is complicated, sometimes described in industry
        jargon, and sometimes inconsistent across fund managers and distributors.

        Investors find the mutual-fund prospectus too complicated or confusing to tell them what
        they want to know and rely on their financial adviser to understand these fees.

        Investors need mutual-fund fees to be clear, simple, and standardized for comparison
        purposes and be available at the point of sale in both verbal and hard copy formats.

        According to July 2004 research conducted by Wirthlin Worldwide for SIA, investors
        feel that information about mutual-fund fees at the point of sale is confusing, difficult to
        find, and not consistent across fund managers and distributors. Furthermore, SEC market
        research conducted in April 2004 to determine investor satisfaction with both current
        point-of-sale and disclosure rules and those the agency proposed in February 2004
        found widespread uncertainty about fees and a need to clarify fee disclosure, both at
        point of sale and across all funds.

        SIA focus groups found that the factors investors deem most important when considering
        a mutual-fund investment are expected future returns, past performance, the adviser’s
        recommendation, and the fund manager. Risks, fees, and costs followed these factors.

        Improving Clarity For Mutual-Fund Transactions ______________________________
        SIA has outlined a set of principles to clarify mutual-fund point-of-sale information and
        disclosure:
        ■    Investors should be clearly informed of a mutual fund’s investment objectives, past
             performance, and risk factors.
        ■    Investors should be clearly informed of the management, sales, distribution,
             transaction, and administrative fees involved in the purchase, ownership, and sale
             of mutual funds, including breakpoints and share-class alternatives.
        ■    Investors should be clearly informed if incentive-compensation arrangements exist that
             might potentially influence a broker-dealer or other adviser’s recommendations.

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Securities Industry Association




         Disclosure Of Fees ____________________________________________________
         Investors should have the opportunity to review information about a mutual-fund investment
         before the point of sale. Regardless of how this information is presented to the investor,
         SIA is committed to certain disclosure principles:
         ■   Disclosure should be in plain English and avoid technical jargon understood only by
             professionals and regulators.
         ■   Disclosure should be consistent and standardized to enable broker-dealers, other
             advisers, and investors to compare information from fund to fund.
         ■   Disclosure about management, sales, and distribution fees should be clear, simple,
             and easily accessible by investors.
         ■   Pre-decision information should be based on a standardized amount (such as fees
             per $1,000) to facilitate comparison among funds.
         ■   Post-decision information (confirmation) should be based on the actual transaction
             amount – to provide accurate net investment value and appropriate breakpoint
             discount.

         While the wide range of mutual funds currently available offer investors a rich selection
         of investment choices and represent a variety of investment-management techniques and
         strategies, the diversity of products and services results in complex data-management
         challenges for each market participant – fund companies, broker-dealers, other advisers,
         and investors themselves.

         SIA believes that the industry can and should do more to clarify information about
         mutual-fund investing and feels it is critical to promote clear, complete, and accurate
         disclosure of investment objectives, past performance, risks, and fee characteristics of
         mutual funds to all investors.