On January 13, 2009, the Securities and Exchange Commission (the “Commission”) published amendments to the registration statement form used by mutual funds to require the inclusion of a summary section at the front of every prospectus that contains key information about the fund, including investment objectives and strategies, risks, costs and performance information.1 The Commission also issued rule amendments allowing funds the option of delivering to investors only the summary section of the prospectus (provided the full statutory prospectus is made available to investors on a fund’s website and delivered to investors upon request). The changes are intended to focus investors on “key information that is important to an informed investment decision.”2
The summary section must include the following elements (in the following order):
- Description of investment objectives and goals;
- Fee table (including annual expenses and any sales charges) and an example of costs;
- Description of principal investment risks and prior performance;
- Identification of fund management (i.e., investment advisers and portfolio managers);
- Terms for purchase and sale of fund shares;
- Certain tax information; and
- Disclosure of financial intermediary compensation.
The summary section is prohibited from including any additional information. The only items that can precede the summary are the prospectus cover page and table of contents. The Commission expects that the summary section will be concise (approximately three or four pages in length), although there is no mandated maximum number of pages.3
Information about multiple classes of shares of any one fund may be combined in the summary section for that fund. However, a prospectus for multiple funds must present a separate summary section for each fund and may not combine the information for more than one fund (except for the information required by Items 5 through 7 above, provided these items are identical for all funds covered in the prospectus).
The “Summary Prospectus” Delivery Option
Under amended Rule 498, the obligation to deliver a mutual fund prospectus under the Securities Act of 1933, as amended, may be satisfied by delivering a stand-alone “summary prospectus.” This summary prospectus is required to contain the information that must be included in the summary section of the statutory prospectus. It may also incorporate by reference information contained in the remainder of a fund’s statutory prospectus and statement of additional information (“SAI”). A stand-alone summary prospectus must include on its cover the fund’s name (and covered share classes), the fund’s exchange ticker symbol, the date of the summary, a statement identifying the document as a “Summary Prospectus” and the following legend:
Before you invest, you may want to review the Fund’s prospectus, which contains more information about the Fund and its risks. You can find the Fund’s prospectus and other information online at [_________]. You can also get this information at no cost by calling [_________] or by sending an e-mail request to [_________].
It should, however, be noted that: “provided the content and order requirements of the rule are met, funds have almost complete flexibility with respect to design matters, including layout, graphics and color.”4 The Commission believes that this new summary prospectus delivery option will enable investors to obtain useful mutual fund information in a format that they are more likely to use and understand.5 To the extent a fund chooses to avail itself of the summary prospectus option, both its statutory prospectus and SAI must be made available on the fund’s website. Also, the complete statutory prospectus must be furnished upon request.
Mutual funds will be required to comply with the form amendments for registration statement filings made on or after January 1, 2010, although funds may elect to comply prior to that date. The summary prospectus delivery option became effective March 31, 2009. Thus, mutual funds may now avail themselves of this option. The full text of the Adopting Release is available at http://www.sec.gov./rules/final/2009/33-8998.pdf.