Eight mutual fund operators, including two affiliated with big banks, will start today to mail experimental "user-friendly" fund profiles to prospective investors.
The profiles, which discuss investment style and performance, will cover Mellon Bank Corp.'s Dreyfus Funds and BankAmerica's Pacific Horizon Funds, among others.
The eight companies spent as many months working with regulators to develop the new model prospectus.
Initially, the simpler discussions will be mailed along with the traditional legalistic documents - the bane of many investors.
Securities and Exchange Commission chairman Arthur Levitt, who called for the initiative, said he is confident about the results.
"The availability of the profile prospectus is an important step ... to take the mystery out of the marketplace," said Mr. Levitt, during a press briefing at the SEC's New York office.
During a year-long pilot program, any fund company can devise its own simplified prospectus as long as it files the documents with the SEC and offers investors a traditional, more detailed prospectus as well.
The new prospectus must contain certain information, such as historical returns, but can be customized by each fund company.
Industry experts said banks in particular stand to benefit from the simpler approach because many of their customers are first-time investors. "It might have particular application in that market," said Matthew P. Fink, president of the Investment Company Institute.
Mr. Levitt has said that he has had troubles himself wading through fund prospectuses.
"Nobody reads the prospectus now because it's just so complex," said Joy Montgomery, president of Money Market Initiatives, Morristown, N.J. "By putting it in plain English, investors will get the information they need."
Debra McGinty-Poteet, managing director of BankAmerica's Pacific Horizon Funds, said the fund group will keep close tabs on "how shareholders accept and understand" the simpler document.
Some industry observers are already optimistic about success. The new language "will clarify things," said Roy T. Gross, senior vice president of Dreyfus Service Corp., the company's brokerage.
The clarity will make it easier for people to "comparative shop" among different funds, Mr. Gross said.
The Investment Company Institute will take the formal lead in surveying investors who have bought funds that use the simpler prospectus. The organization likely will use a combination of questionnaire and focus groups, Mr. Fink said. The SEC will review the results.
Mr. Levitt did not rule out the SEC's adopting some kind of compromise between the full prospectus and the simpler version.
"I don't want to necessarily suggest that's going to happen in the next few months," Mr. Levitt said. "But this represents a clearer picture of whether or not that can happen."
