October 22, 1992
TO: BOARD OF GOVERNORS NO. 76-92
SEC RULES COMMITTEE NO. 81-92
DIRECT MARKETING COMMITTEE NO. 41-92
RE: INSTITUTE’S SUBMISSION TO THE SEC ON "OFF-THE-PAGE SALES"
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Today the Institute submitted to the SEC staff our proposal
to permit investors to purchase shares of a mutual fund directly
in response to certain advertisements. The Institute’s proposal
implements a recommendation of the Division of Investment
Management in its study of reform of the Investment Company Act.
The SEC Staff’s Proposal
As you may know, the Division’s proposal generally would:
(1) require that the new advertisements contain standardized,
core information about the fund; (2) require that the statutory
prospectus be delivered with the confirmation of the sale; (3)
continue to permit investors to request the statutory prospectus
before investing; and (4) treat the advertisements as
prospectuses for purposes of liability under the Securities Act.
The Institute’s Submission
The Institute’s submission was developed by members of the
Subcommittee on Advertising. It proposes to amend Rule 482 under
the Securities Act to permit a new advertisement that could
include a purchase application (which would be called a "summary
advertising prospectus"). The proposal would require that the
summary advertising prospectus contain core information that is
material to an investment decision, such as information about the
fund’s investment objectives and policies, significant risk
factors, and fees and expenses. The proposal also would permit
the summary advertising prospectus to contain information other
than that which is required by the rule.
In addition to the changes in Rule 482, we propose that
summary advertising prospectuses be pre-filed with the NASD for
one year after adoption of the rule. This provision would give
the NASD time to review summary advertising prospectuses and to
establish standards for their use.
We will keep you informed of developments.
Matthew P. Fink
President
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