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SEC Requires Plain English for Prospectuses

(CN) - The Securities and Exchange Commission has voted this week to make information about mutual funds more clear and accessible, by requiring plain English in a summary on the front page of a prospectus.

"Investors often find current fund prospectuses to be lengthy, legalistic and confusing" says Andrew Donohue, Director of the SEC's Division of Investment Management.

To remedy this, the commission mandates that the funds include a rigidly structured summary on the front page of the prospectus, in plain English.

The summary prospectus must cover the investment strategies, risks, costs, financial intermediary compensation, tax consequences, and the procedure of purchase and sale relating to the mutual funds.

"The summary prospectus will quickly give investors a basic understanding of the fund" says SEC Chairman Christopher Cox.

Investors must also be able to choose between e-mail and paper when receiving their information and must be able to download an electronic version of the information.

Also, more information will be online and these resources will be in a user-friendly format.

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