4.12.2007 Investment Management Director Buddy Donohue spoke at the 2007 Practicing Law Institute Investment Management conference in New York. Director Donohue began by characterizing this period of mutual fund regulation as a time of normalcy and said the staff will be focusing on the review and refinement of its regulatory inventory. He emphasized that part of the Division's objective in embarking on this review is to enable the Division to focus on achieving its regulatory goal of investor protection, without overburdening firms and investors with regulations that may no longer be necessary or effective.

The Division's disclosure reform initiative is a top priority for SEC Christopher Chairman Cox and plays a key role in what Cox has called the Commission's "war on complexity" in the information that investors receive, Director Donahue said. The initiative has two interconnected components — the first is mutual fund disclosure reform and the second is interactive data tagging. For the mutual fund disclosure reform component, the Division is preparing a recommendation to the SEC that would permit funds to offer securities pursuant to a streamlined disclosure document to be delivered to investors electronically or on paper, while requiring more detailed information to be available on the Internet or delivered on paper upon request. The streamlined disclosure document that the Division is considering could include key information investors need to make informed decisions, such as fees and expenses, risks, investment objectives and strategies, and historical returns.

The second component of disclosure reform would provide investors with a complementary ability to access more detailed information about a fund through the use of interactive data. Recently, the Investment Company Institute ("ICI") released for public review a draft taxonomy that it developed for tagging the key disclosure data contained in the risk/return summary at the front of every mutual fund prospectus. This information includes investment objectives and strategies, costs, risks, and historical performance and is critical to an investor's informed investment decision. With this development, the ICI has made great strides towards the creation of a technological tool that has the potential to enhance the way in which information is provided to mutual fund investors. In February, the SEC issued a proposed release requesting comment on permitting funds to use the new taxonomy developed by the ICI to tag their risk return summaries in the Commission's voluntary interactive data filing program. The comment period closed in March, and the comment letters are being reviewed. The voluntary risk return summary tagging program would test the usefulness of the interactive tagging system, as well as identify any deficiencies of the system. “I am very hopeful that this initiative is successful,” Director Donohue said.

The Division is now working with the Department of Labor to extend the application of these reforms to the disclosures made to participants in 401(k) plans. Different 401(k) participants receive various levels of information, from full prospectuses and shareholder reports to one-page charts containing limited data and information. Director Donohue said that 401(k) participants investing in funds would benefit greatly from standardized information about fund investments - if that standardized information is clear and meaningful.

He also spoke about amendments to the books and records rules for investment companies and investment adviser, complex instruments and Rule 12b-1. Please click http://www.sec.gov/news/speech/2007/spch041207ajd.htm to access a copy of the speech.