[13693]
July 2, 2001
TO: ADVERTISING COMPLIANCE ADVISORY COMMITTEE No. 7-01
SEC RULES COMMITTEE No. 51-01
RE: DRAFT LETTER TO SEC RECOMMENDING AMENDMENTS TO RULE 482
The Securities and Exchange Commission is considering amendments to Rule 482 to,
among other things, address concerns about the “currentness” of performance information in
mutual fund advertisements. Attached for your review is a draft letter to the SEC, which
provides our proposed recommendation for addressing this issue. Our recommendation,
discussed in more detail below, is based upon prior discussions with members and
conversations with staff of the SEC.
Please provide your comments on the draft letter to me by the close of business on
Wednesday, July 11th (via phone: 202/326-5819; fax: 202/326-5839; or e-mail: dvanslyk@ici.org).
The Institute’s draft letter recommends that the staff amend Rule 482 to require narrative
disclosure alerting investors to potential changes in advertised returns and directing them to a
source for more current performance data, such as a web site or toll-free telephone number.
The letter also recommends that funds be required to provide average annual total return
information for one, five and ten year periods current to at least the most recent month end via
telephone, web site, or both, at the fund’s discretion. Additionally, to ensure that this disclosure
will be clearly visible to investors, the letter recommends that certain requirements apply to the
location and prominence of the disclosure, including that it must appear in close proximity to
the presentation of the performance numbers included in the body of the advertisement, and
not in a footnote.
The draft letter also presents arguments against amending Rule 482 to require
performance information that is current to the most recent month end prior to the submission
deadline for a particular publication. Specifically, the letter argues that a month-end
requirement in 482 advertisements would: (i) increase costs and create coordination and
distribution difficulties, as well as additional compliance burdens for funds; (ii) erode the
standardization of performance data that is generally provided by quarter-end numbers; and
(iii) would not provide much, if any, additional investor protection as compared to our proposal
for additional narrative disclosure.
2We are interested in receiving members’ comments on all aspects of our draft letter. We
are also interested in members’ input on the following issue. In an effort to track the language
of Rule 482(f), our letter recommends that “funds be required to provide average annual total
return data or one, five and ten year periods current to the most recent practicable date” on their
web site or via telephone. The letter then states that “total return information current to the
most recent month end, prior to the deadline for posting information on the web site or phone
system, would be deemed to comply with this requirement.” This language would provide
funds flexibility to include data on their web site or via telephone that is more current than
month end. Do members agree with this approach, or would it be preferable to require funds to
provide only month-end data via phone or web site to promote greater uniformity and
comparability?
Doretha VanSlyke Zornada
Assistant Counsel
Attachment
Attachment (in .pdf format)