July 7, 1994
TO: SEC RULES COMMITTEE NO. 73-94
STATE SECURITIES MEMBERS NO. 35-94
SUBCOMMITTEE ON ADVERTISING NO. 12-94
UNIT INVESTMENT TRUST COMMITTEE NO. 47-94
RE: VERMONT ISSUES POLICY STATEMENT ON MUTUAL FUND WRAPPERS
__________________________________________________________
The Vermont Department of Banking, Insurance and Securities
recently issued the attached Securities Division Bulletin No. 94-1-
S, "Statement of Policy Regarding Mutual Fund Prospectus Wrapper
Brochures" ("Bulletin"). The policy outlined in the Bulletin
becomes effective July 15, 1994.
According to the Bulletin, the Securities Division has made a
determination that "the format, content or presentation of a
prospectus wrapper brochure within which a [mutual fund] prospectus
is bound or enclosed may ... operate to induce or influence an
investor to rely primarily ... on the content of promotional
materials in making an investment decision rather than on
information in the ... prospectus." Under these circumstances, a
prospectus wrapper may be viewed as "detracting from, superseding
or defeating the purpose of the prospectus" within the meaning of
Rule 3.18 of the Securities Division.
In order to address the foregoing concern, the Securities
Division will require prospectus wrappers to include:
1. the following legend on the cover page of the prospectus
wrapper, in bold-face roman type:
"THIS BROCHURE INCLUDES A PROSPECTUS WHICH DESCRIBES IN
DETAIL THE FUND'S OBJECTIVES, INVESTMENT POLICIES, RISKS,
SALES CHARGES, FEES AND OTHER MATTERS OF INTEREST.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR
SEND MONEY", and
2. a sentence on each page of the prospectus wrapper that
states in bold-face type that the prospectus wrapper
brochure is not part of the prospectus.
The Bulletin also reiterates Section 4234(b) of the Vermont
Securities Act, which states that advertising material may not be
used in Vermont until it has been submitted to the Securities
Division for approval. Prospectus wrappers filed pursuant to
Section 4234(b) must be identified and submitted with the
prospectus. The Bulletin further states that the Securities
Division will review prospectus wrappers to ensure that they comply
with the above-referenced policy.
Patricia Louie
Associate Counsel
Attachment