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- ICI Comment Letters
ICI Supports NASD Fund Performance Advertising Proposal
Washington, DC, January 23, 2004 - The Institute supports requiring funds to disclose their annual expense ratios in fund performance advertisements. This requirement will provide investors with additional information about the costs of buying and owning mutual funds and will facilitate comparisons among funds.
In December 2003, NASD proposed amendments to Rules 2210 and 2211 to require all member communications with the public that contain investment company performance information to present specified information about the fund’s expenses and performance in a prominent text box. Among other things, NASD’s proposal would require that all performance advertising contain a text box that sets forth the fund’s standardized performance information, maximum sales charge, and annual expense ratio.
In a recent comment letter, the Institute expresses support for the proposal and for NASD’s decision not to include (as an alternative) a proposed requirement that funds disclose the actual dollar amount of expenses incurred by a hypothetical fund shareholder in performance advertisements. Dollar amount disclosure is more appropriate in reports to shareholders than in advertisements
The Institute also makes the following recommendations, among others:
- the proposal should be revised to require funds to disclose in performance advertisements the same annual expense ratio that appears in the fund’s most recent report to shareholders;
- the compliance date should range from three to six months from the date of adoption, depending on the nature of the new requirements; and
- sales material that does not present performance information should not be required to include annual expense ratios..