WASHINGTON -- The SEC staff is considering proposing a rule that would give bond and other money market funds the option of using a new, simplified prospectus, SEC commissioner Richard Roberts said last week.
The new rule, if proposed by the Securities and Exchange Commission's division of investment management, would come on the heels of two informal initiatives that SEC chairman Arthur Levitt announced last week for simplifying mutual fund prospectuses.
Money market funds, which are supposed to hold only short-term, highly liquid, safe securities, currently use the same prospectus format as mutual funds.
Roberts told those attending a securities conference in Denver that the SEC staff is considering allowing these funds to use an even simpler format than mutual funds that might include a paragraph comparing the fund's performance with an appropriate index or group of similar funds.
The new format might also include an abbreviated description of the fund's investment objectives, types of portfolio securities, and valuation method used in determining performance.
Detailed technical disclosures, such as information on securities valuation, could be moved to a supplemental document called Statement of Additional Information and be available upon request.
Roberts said he would support such a rule if it is proposed.
"I am of the view that simplified prospectuses, if designed properly, may in fact be more responsive to the needs of money market fund investors than the current prospectus format," he said.
There are about 950 money market funds that hold roughly $580 billion in more than 23 million shareholder accounts, Roberts said.
-- Lynn Stevens Hume