WASHINGTON -- Advisors who have been frustrated by the byzantine language found in mutual fund prospectuses might have a friend in the SEC.
Norm Champ, the director of the SEC's Division of Investment Management, says the commission is expecting fund managers to write their prospectuses in plain English, strip out the jargon, and offer summaries that give advisors and investors a "clear and concise" picture of the investment strategy behind the fund.
"We are seeing some exceedingly long summary sections," Champ said this week at the Insured Retirement Institute's regulatory conference. "We're seeing a lot of technical terms in these summaries that are not then explained."
ENHANCED DISCLOSURES
Just last week, SEC staffers published a guidance update regarding enhanced disclosures for mutual funds -- the latest in a series of staff-level publications that Champ says are designed to help advisors and other regulated entities shape their compliance policies and procedures.
Such guidance updates don't amount to official policy, Champ says, but they can nonetheless provide a timely reminder of issues on the commission's radar. Last year, SEC staffers published 14 guidance updates; this year, to date, he says, the agency has issued nine such documents.
The updates are part of a broader effort at the SEC to expand the information compiled about the industry, Champ says -- with the overarching goal of achieving a more data-driven regulatory approach.
"With respect to data that we gather on the investment management industry, the staff is trying to think of ways to make data more useful," he says. "On that front, we've been working on developing a recommendation to the commission about enhanced data gathering on mutual funds and registered investment companies -- to try to ... streamline the information we receive that funds report to us and to be able to give the commission and the staff better and more timely information on funds and their holdings."
MODERNIZATION NEEDED
Champ underscores the importance of the modernization efforts that his division has undertaken; some information about funds at the commission actually remains in DOS format, he says. Ultimately, he says, his team aims to establish a "more workable" set of reporting procedures that will be "minimally disruptive" to firms.
Champ emphasizes that his division is taking a broad view of the industry, monitoring a range of sources -- like disclosures and other filings as well as press reports -- as it scans for potential signs of trouble and looks for new and emerging trends.
To that end, Champ says that his team has also begun meeting with key industry executives and company boards at mutual funds and large asset managers to gather intelligence in the field.
"These meetings have allowed us to obtain a good view of firms," Champ says. "We think we're better regulators to the extent we better understand the workings of the people we regulate."
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