A top Securities and Exchange Commission official expects that a rule establishing more simplified mutual fund prospectuses could be in place within a year.
Barry P. Barbash, the SEC's director of investment management, said the transition from the traditional long-form prospectus to a shorter, more reader-friendly version has been bolstered by the success of a pilot program involving several leading fund companies.
Mr. Barbash said the prospectus was generally well-received by customers and participating fund companies, which included T. Rowe Price, Vanguard Group, Fidelity Investments, and Bank of America.
But in remarks last week before a mutual fund conference sponsored by the Investment Company Institute and the Federal Bar Association, Mr. Barbash said the advent of the Internet would eventually force the issue by giving people the choice of viewing or downloading either a short or long- form prospectus.
That means technology is pushing an affirmative answer to the question of whether an investor should be allowed to buy fund shares before seeing a full prospectus, Mr. Barbash explained.
"One way or another, we are going to get to the answer of yes," Mr. Barbash said.
The issue of prospectus reform has been a high on the minds of regulators, fund executives, and consumer alike. That's because the traditional prospectus - a largely legal document - has alienated many consumers who desire simple information to help them make investment choices.
A consensus emerged at the conference that something radical needs to be done to get people to understand important information they now tend to ignore.
Destroying the old prospectus and starting over from scratch is necessary, because tinkering or "working backward...just isn't going to get the job done," said Paul G. Haaga Jr., senior vice president and director, Capital Research & Management Co., Los Angeles.
