U.S. SEC adopts rules to improve fund disclosures

WASHINGTON (Reuters) - U.S. securities regulators adopted rules on Wednesday requiring mutual funds to make their prospectuses easier for investors to read, understand and access.

The Securities and Exchange Commission voted unanimously to require the $10.6 trillion (£7.14 trillion) mutual fund industry to provide summary prospectuses in a clear, concise format, as well as more detailed information on the Internet.

"This is good for investors and will aid their decision making," SEC commissioner Luis Aguilar said at an agency meeting. "For years investors and industry participants have criticized mutual fund prospectuses for being too long, too complicated and difficult for investors to use," he said.

Almost half of the households in the United States use mutual funds to save for retirement or college tuition. But many consumers cannot understand the documents that fund firms such as Fidelity Investments or Vanguard are required to publish, detailing what will be done with their money.

Nor do retail investors generally take the time to wade through the prospectuses, which often run hundreds of pages long.

The SEC's rule requires mutual funds to include key information at the front of its statutory prospectus such as the fund's investment objectives, strategies, risks and costs.

The summary prospectus also needs to include brief information about the investment advisers and portfolio managers, as well as the fund's purchase and sale procedures and tax consequences.

The new SEC rules, which do not go into effect until 2010, will allow investors to access more detailed information via the Internet or from the traditional paper prospectus.

"Everyone who wants to drill down into the details will have the opportunity to do so," SEC Chairman Christopher Cox said.

New SEC rules will allow mutual funds to post their full prospectus on the Internet provided the information is presented in a user-friendly format and permits investors to move back and forth between the summary and longer prospectus.

Mutual funds will have to ensure that investors can download and retain an electronic version of the information.

Cox said investors and others will have "more easily searchable information on the Internet that will be more readily susceptible to analysis than the long paper documents."

(Reporting by Rachelle Younglai: Editing by Maureen Bavdek and Brian Moss)