1 See Memorandum to SEC Rules Committee No. 8-95, dated January 19, 1995.
March 9, 1995
TO: SEC RULES COMMITTEE No. 38-95
RE: INSTITUTE LETTER ON IMPROVING THE DISCLOSURE REVIEW/COMMENT
PROCESS
______________________________________________________________________________
As we recently informed you, the Division of Investment Management had requested
industry input on ways to improve the disclosure review/comment process.1 In response, the
Institute submitted the attached letter to the staff with comments on and suggestions for
improving the process.
At the outset, the Institutes letter notes that prospectus simplification and the
disclosure review/comment process are inextricably linked. In particular, the letter notes that
the length and complexity of fund prospectuses is due in part to comments provided by the
SEC staff as well as by state examiners during the review process. Therefore, the letter
suggests that as the SEC staff proceeds with this project and its overall efforts to enhance the
clarity of fund disclosure documents, it should work closely with the state securities
administrators and also coordinate with the National Association of Securities Dealers, Inc. and
the banking agencies to ensure that they do not impose disclosure requirements that are
inconsistent with the staffs efforts.
One general suggestion that the letter makes is for the staff to modify its approach and
orientation so that there is greater recognition of the fact that registrants assume liability for the
adequacy of their disclosure documents under the Securities Act, and therefore, it is ultimately
up to the registrant whether or not to incorporate staff suggested disclosure in its prospectus.
Accordingly, the staff should not "insist" that certain comments be incorporated into a
registration statement before it can be declared effective. The Institutes letter also (1) includes
a number of recommendations for improving the process (e.g., the staff should
follow the selective review procedures, provide oral comments on all filings by a certain
specified deadline, allow certain initial registration statements to go effective automatically), (2)
discusses ways to improve the caliber of comments given (e.g., promote the consistency of
comments given by the different branches, periodically review the comments given to
registrants) and (3) identifies specific areas of disclosure that should be deleted or at least
streamlined (e.g., junk bonds, foreign securities, information in the financial highlights table,
yield and total return calculations).
Amy B.R. Lancellotta
Associate Counsel
Attachment