growing pack of regulatory watchdogs, will soon feel even more pressure to upgrade their mutual fund sales practices. The need for improved disclosure and suitability assessments for all brokers was a consistent theme throughout last week's fall meeting of the National Association of Securities Dealers, the self-regulatory trade organization. Regulators with both the NASD and the Securities and Exchange Commission argued that brokers have to step up their efforts to plainly explain the risks and expenses of mutual fund investment to customers. "We're not expecting an oral prospectus," but rather that customers get enough information before they buy, said R. Clark Hooper, an NASD vice president who regulates advertising and sales of mutual funds by members. This heightened emphasis on the role of the broker comes as many regulators begin to question whether investors get enough useful information from fund prospectuses. Indeed, investor complaints and feedback from consumer focus groups have led the SEC to rethink the role of fund prospectuses, said Barry Barbash, who oversees mutual fund company compliance at the Securities and Exchange Commission. "The prospectus is probably the most despised document out there," Mr. Barbash said. "More and more of our disclosure initiative will be governed by the concept that less is more" for prospectuses, he added. "We have started to focus on sales practices on the one hand and disclosure on the other." He told securities executives that the first of a series of consumer focus groups to review streamlined prospectuses was held last week. The results confirmed that brevity, clarity, and simplicity are what consumers want in a prospectus. If briefer documents become the norm, however, brokers can expect to shoulder a heavier burden in explaining the details. The intricacies of investment risk, sales charges, and fund expenses may then become a larger part of the sales pitch. But lengthy prospectuses are unlikely to fade overnight, because they also serve as insurance policies against lawsuits, some fund executives say. Although simpler prospectuses may appeal to many investors, fund companies stuff them with details to satisfy state regulators and to head off plaintiffs' attorneys. "None of them have ever said you told me too much," commented Paul G. Haaga, Jr., senior vice president, Capital Research and Management, investment adviser to the American Funds Group, Los Angeles. Some of the SEC's own requirements have helped inflate prospectuses. Ms. Hooper suggested that a careful look at "rules on the books" would be valuable. Mr. Barbash responded that, in fact, revisiting some of the commission's requirements "is on our agenda."

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