Prospectus Old News

Articles by Fund Democracy: Archives

The Fund Prospectus: Yesterday's News, SmartMoney.com (May 11, 2000).

Abstract: Stellar fund performance isn't hard to find. When mutual funds do well, their distributors broadcast the news every way and everywhere they can. But poor performance can be much harder to locate. You won't find it in mutual fund ads. Nor will you find it in fund prospectuses, at least not until negative returns are more than a year old. (The full text of this article is available to SmartMoney.com subscribers.)

A mutual fund prospectus is supposed to be the most reliable source of information about mutual funds. But as highlighted by this article, prospectuses can provide the most misleading legal presentation of mutual fund performance that you can find. The article uses Internet funds as an example, showing how they can keep their stellar 1999 returns in their prospectuses while omitting any reference to their miserable performance since the beginning of the year. Surprisingly, stale performance can be included, and current performance omitted, for up to 16 months. The SEC could fix this problem by reforming fund disclosure requirements to focus on providing investors with useful, current information about funds. If you agree, let the Commission know! SEND A MESSAGE TO CHAIRMAN LEVITT