* See Memorandum to Closed End Investment Company Committee No. 1-97, SEC Rules Committee No. 7-97 and Unit Investment Trust Committee No. 2-97, dated January 16, 1997.
March 7, 1997
TO: CLOSED-END INVESTMENT COMPANY COMMITTEE No. 8-97
SEC RULES COMMITTEE No. 28-97
UNIT INVESTMENT TRUST COMMITTEE No. 15-97
RE: DRAFT COMMENT LETTER ON SEC PLAIN ENGLISH PROPOSAL
______________________________________________________________________________
Attached for your review is a draft comment letter on the SECs plain English disclosure
proposal.* The draft letter is summarized below. Please contact me at (202) 326-5822 (or by e-
mail to frances@ici.org) by noon on Friday, March 14th if you have any comments on the
attached draft letter.
The draft letter expresses general support for the plain English proposal, noting that it
complements other, ongoing efforts to improve investment company disclosure. The letter
recommends that the SEC apply the plain English principles in a flexible manner. It opposes
the proposed amendment to Rule 461 that would permit the SEC to refuse to accelerate the
effectiveness of a registration statement that does not meet the plain English requirements.
Instead, the letter recommends that the SEC enforce its existing standard under Rule 461 with
the plain English standards in mind. (Rule 461 currently authorizes the SEC to refuse to
accelerate effectiveness "[w]here there has not been a bona fide effort to make the prospectus
reasonably concise and readable, so as to facilitate an understanding of the information
required or permitted to be contained in the prospectus.")
The draft letter indicates that plain English should not increase liability, and mentions
that the SEC may help alleviate liability concerns by making clear its policy to encourage plain
English disclosure. As you review the letter, please consider whether the Institute should
recommend that the SEC take any further steps in this direction such as stating that overly
detailed disclosure is not required. Alternatively, should we recommend that the SEC clarify
that investment companies are free to include in their prospectuses as much detailed disclosure
as they wish?
The draft letter supports the proposed scope of the requirements (i.e., its application
only to the front and back cover pages, summary and risk factor sections of prospectuses). It
indicates that in the event the SEC decides to expand the scope, it should continue to exclude
statements of additional information from the requirements.
2Finally, the draft letter states that it is essential that any plain English requirements
adopted for mutual funds become effective simultaneously with the proposed amendments to
Form N-1A and the fund profile rule.
Frances M. Stadler
Associate Counsel
Attachment (in .pdf format)