Can We Finally Empower Investors With Plain English Fund Disclosure?
Written by Jasmin Sethi and published in Forbes.
Given the current polarized political environment, I was thrilled to see a recent example of bipartisanship by the SEC in its announcement of the fund disclosure proposal. The proposal seeks to achieve a laudable goal – to make disclosures for investors easier to understand. While this seems like a common-sense idea, it is revolutionary in many ways and could be a catalyst for a host of innovations that empower investors.
The Streamlined Shareholder Report Is A Win For Investors
The new streamlined shareholder report, of which the SEC gives an example, will show the performance of a hypothetical investment of $10,000 over the past year and the performance of the fund over the past one, five, ten-years. It will also show fund information, such as fund expenses, performance, and material fund changes. The use of visual aids, including graphics, tables, and bulleted lists, are encouraged to make this information more digestible. These reports will replace the numerous and voluminous documents shareholders currently receive, and likely do not read, such as annual prospectuses, holdings, proxy voting information, and credit ratings (much of this information will still be available as before on the firm’s website but will not be sent to investors on a regular basis). This simplification of disclosure could significantly empower investors in their relationships with their financial advisers by making it easier for them to see what expenses they are paying for their investment products.
