Both modern art and a fund prospectus can be totally incomprehensible. 401(k) participants may not be exposed to modern art, but they sure are provided mutual fund prospectuses – at least by those plan sponsors looking for 404(c) protection.
Understanding modern art will have to wait for an Art Apprec course. The Securities and Exchange Commission ("SEC") is trying to do something about making the fund prospectus more user-friendly.
Last November, the SEC proposed changes to the prospectus that would make it more streamlined while still requiring the funds to make the more complete prospectus available to investors. The deadline for submitting comments was February 28, 2008. Most were favorable. The mutual fund industry as represented by the Investment Company Institute (“ICI”) supports the SEC proposal. Commentators have projected the proposal to be finalized as early as this summer.
Sounds good, doesn’t it. But I’m a little bit concerned because of its name. It’s called a Summary Prospectus like that ERISA document that also has the word Summary in its name as in Summary Plan Description (SPD). Hopefully, the Summary Prospectus will not get the sometimes response by a plan participant who upon receipt of the SPD asks, Yes, but what does it mean?