Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies

Federal RegisterJan 26, 2009

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, 239, and 274

[Release Nos. 33-8998; IC-28584; File No. S7-28-07]

RIN 3235-AJ44

Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies

AGENCY:

Securities and Exchange Commission.

ACTION:

Final rule.

SUMMARY:

The Securities and Exchange Commission is adopting amendments to the form used by mutual funds to register under the Investment Company Act of 1940 and to offer their securities under the Securities Act of 1933 in order to enhance the disclosures that are provided to mutual fund investors. The amendments require key information to appear in plain English in a standardized order at the front of the mutual fund statutory prospectus. The Commission is also adopting rule amendments that permit a person to satisfy its mutual fund prospectus delivery obligations under section 5(b)(2) of the Securities Act by sending or giving the key information directly to investors in the form of a summary prospectus and providing the statutory prospectus on an Internet Web site. Upon an investor's request, mutual funds are also required to send the statutory prospectus to the investor. These amendments are intended to improve mutual fund disclosure by providing investors with key information in plain English in a clear and concise format, while enhancing the means of delivering more detailed information to investors. Finally, the Commission is adopting additional amendments that are intended to result in the disclosure of more useful information to investors who purchase shares of exchange-traded funds on national securities exchanges.

DATES:

Effective Date:

March 31, 2009.

Compliance Date:

See Part III.D. of this release for information on compliance dates.

FOR FURTHER INFORMATION CONTACT:

Kieran G. Brown, Senior Counsel; Sanjay Lamba, Senior Counsel; Devin F. Sullivan, Attorney; or Mark T. Uyeda, Assistant Director, Office of Disclosure Regulation, at (202) 551-6784, or, with respect to exchange-traded funds, Adam B. Glazer, Senior Counsel, Office of Regulatory Policy, at (202) 551-6792, Division of Investment Management, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-5720.

SUPPLEMENTARY INFORMATION:

The Securities and Exchange Commission (“Commission”) is adopting amendments to rules 159A,

482,

485,

497,

and 498

under the Securities Act of 1933 (“Securities Act”) and rules 304

and 401

of Regulation S-T.

The Commission is also adopting amendments to Form N-1A,

the form used by open-end management investment companies to register under the Investment Company Act of 1940 (“Investment Company Act”) and to offer securities under the Securities Act; Form N-4,

the form used by insurance company separate accounts organized as unit investment trusts and offering variable annuity contracts to register under the Investment Company Act and to offer securities under the Securities Act; and Form N-14,

the form used by registered management investment companies and business development companies to register under the Securities Act securities to be issued in business combinations.

17 CFR 230.159A.

17 CFR 230.482.

17 CFR 230.485.

17 CFR 230.497.

17 CFR 230.498.

17 CFR 232.304.

17 CFR 232.401.

17 CFR 232.10

et seq.

17 CFR 239.15A and 274.11A.

17 CFR 239.17b and 274.11c.

17 CFR 239.23.

Table of Contents

I. Executive Summary

II. Background

III. Discussion

A. Amendments to Form N-1A

1. General Instructions to Form N-1A

2. Exchange Ticker Symbols

3. Information Required in Summary Section

a. Elimination of Proposed Portfolio Holdings Requirement

b. Order of Information

c. Investment Objectives and Goals

d. Fee Table

e. Investments, Risks, and Performance

f. Management

g. Purchase and Sale of Fund Shares

h. Tax Information

i. Financial Intermediary Compensation

4. Exchange-Traded Funds

a. Purchasing and Redeeming Shares

b. Total Return

c. Premium/Discount Information

5. Conforming and Technical Amendments to Form N-1A

B. New Delivery Option for Mutual Funds

1. Use of Summary Prospectus and Satisfaction of Statutory Prospectus Delivery Requirements

2. Content of Summary Prospectus

a. General

b. Cover Page or Beginning of Summary Prospectus

c. Updating Requirements

3. Provision of Statutory Prospectus, SAI, and Shareholder Reports

a. Documents Required To Be Provided on the Internet

b. Formatting Requirements for Information Provided on the Internet

c. Technological Requirements for Online Information

d. Ability To Retain Documents

e. Safe Harbor for Temporary Noncompliance

f. Requirement To Send Documents

4. Incorporation by Reference

a. Permissible Incorporation by Reference

b. Effect of Incorporation by Reference

5. Filing Requirements for the Summary Prospectus

C. Technical and Conforming Amendments

D. Compliance Date

IV. Paperwork Reduction Act

V. Cost/Benefit Analysis

VI. Consideration of Promotion of Efficiency, Competition, and Capital Formation

VII. Final Regulatory Flexibility Analysis

VIII. Statutory Authority

Text of Final Rule and Form Amendments

I. Executive Summary

Today, the Commission is adopting an improved mutual fund disclosure framework that it originally proposed in November 2007.

This improved disclosure framework is intended to provide investors with information that is easier to use and more readily accessible, while retaining the comprehensive quality of the information that is available today. The foundation of the improved disclosure framework is the provision to all investors of streamlined and user-friendly information that is key to an investment decision.

Investment Company Act Release No. 28064 (Nov. 21, 2007) [72 FR 67790 (Nov. 30, 2007)] (“Proposing Release”).

To implement the new disclosure framework, we are adopting amendments to Form N-1A that will require every prospectus to include a summary section at the front of the prospectus, consisting of key information about the fund, including investment objectives and strategies, risks, costs, and performance. We are also adopting a new option for satisfying prospectus delivery obligations with respect to mutual fund securities under the Securities Act. Under the option, key information will be sent or given to investors in the form of a summary prospectus (“Summary Prospectus”), and the statutory prospectus will be provided on an Internet Web site.

Funds that select this option will also be

required to send the statutory prospectus to the investor upon request.

A “statutory prospectus” is a prospectus that meets the requirements of Section 10(a) of the Securities Act [15 U.S.C. 77j(a)].

In addition, the Commission is adopting amendments to Form N-1A relating to exchange-traded funds (“ETFs”) that we proposed in a separate release in March 2008.

These amendments are intended to result in the disclosure of more useful information to investors who purchase shares of exchange-traded funds on national securities exchanges.

See

Investment Company Act Release No. 28193 (Mar. 11, 2008) [73 FR 14618 (Mar. 18, 2008)] (“ETF Proposing Release”).

II. Background

Millions of individual Americans invest in shares of open-end management investment companies (“mutual funds”),

relying on mutual funds for their retirement, their children's education, and their other basic financial needs.

These investors face a difficult task in choosing among the more than 8,000 available mutual funds.

Fund prospectuses, which have been criticized by investor advocates, representatives of the fund industry, and others as being too long and complicated, often prove difficult for investors to use efficiently in comparing their many choices.

Current Commission rules require mutual fund prospectuses to contain key information about investment objectives, risks, and expenses that, while important to investors, can be difficult for investors to extract. Prospectuses are often long, both because they contain a wealth of detailed information, which our rules require, and because prospectuses for multiple funds are often combined in a single document. Too frequently, the language of prospectuses is complex and legalistic, and the presentation formats make little use of graphic design techniques that would contribute to readability.

An open-end management investment company is an investment company, other than a unit investment trust or face-amount certificate company, that offers for sale or has outstanding any redeemable security of which it is the issuer.

See

Sections 4 and 5(a)(1) of the Investment Company Act [15 U.S.C. 80a-4 and 80a-5(a)(1)].

Investment Company Institute,

2008 Investment Company Fact Book,

at 70 (2008) (“2008 ICI Fact Book”), available at

http://www.ici.org/pdf/2008_factbook.pdf

(88 million individual investors own mutual funds).

Id.

at 16 (in 2007, there were 8,752 mutual funds).

See, e.g.

, Don Phillips, Managing Director, Morningstar, Inc., Transcript of U.S. Securities and Exchange Commission Interactive Data Roundtable, at 26 (June 12, 2006), available at

http://www.sec.gov/spotlight/xbrl/xbrlofficialtranscript0606.pdf

(“June 12 Roundtable Transcript”) (stating that current prospectus is “bombarding investors with way more information than they can handle and that they can intelligently assimilate”). A Webcast archive of the June 12 Interactive Data Roundtable is available at

http://www.connectlive.com/events/secxbrl/. See also

Investment Company Institute,

Understanding Preferences for Mutual Fund Information,

at 8 (Aug. 2006), available at

http://ici.org/pdf/rpt_06_inv_prefs_summary.pdf

(“ICI Investor Preferences Study”) (noting that sixty percent of recent fund investors describe mutual fund prospectuses as very or somewhat difficult to understand, and two-thirds say prospectuses contain too much information); Associated Press Online,

Experts: Investors Face Excess Information

(May 25, 2005) (“There is broad agreement * * * that prospectuses have too much information * * * to be useful.” (quoting Mercer Bullard, President, Fund Democracy, Inc.)); Thomas P. Lemke and Gerald T. Lins,

The “Gift” of Disclosure: A Suggested Approach for Managed Investments,

The Investment Lawyer, at 19 (Jan. 2001) (stating that the fund prospectus “typically contains more information than the average investor needs”).

Numerous commentators have suggested that investment information that is key to an investment decision should be provided in a streamlined document with other more detailed information provided elsewhere.

Furthermore, recent investor surveys indicate that investors prefer to receive information in concise, user-friendly formats.

See, e.g.

, Charles A. Jaffe,

Improving Disclosure of Funds Can Be Done

, The Fort Worth Star-Telegram (May 7, 2006) (“Bring back the profile prospectus, and make its use mandatory * * *. A two page-summary of [the] key points [in the profile]—at the front of the prospectus—would give investors the bare minimum of what they should know out of the paperwork.”);

Experts: Investors Face Excess Information, supra

note 18 (stating “a possible middle ground in the disclosure debate is to rely more heavily on so-called profile documents which provide a two-page synopsis of a fund” (attributing statement to Mercer Bullard, President, Fund Democracy, Inc.));

Mutual Funds: A Review of the Regulatory Landscape

, Hearing Before the Subcomm. on Capital Markets, Insurance and Government Sponsored Enterprises of the Comm. on Financial Services, U.S. House of Representatives, 109th Cong. (May 10, 2005), at 24 (“To my mind, a new and enhanced mutual fund prospectus should have two core components. It should be short, addressing only the most important factors about which typical fund investors care in making investment decisions, and it should be supplemented by additional information available electronically, specifically through the Internet, unless an investor chooses to receive additional information through other means.” (Testimony of Barry P. Barbash, then Partner, Shearman & Sterling LLP)); Thomas P. Lemke and Gerald T. Lins,

The “Gift” of Disclosure: A Suggested Approach for Managed Investments, supra

note 18, at 19 (information that is important to investors includes goals and investment policies, risks, costs, performance, and the identity and background of the manager).

In addition, a mutual fund task force organized by the National Association of Securities Dealers, Inc. (“NASD”) supported the use of a “profile plus” document, on the Internet, that would include, among other things, basic information about a fund's investment strategies, risks, and total costs, with hyperlinks to additional information in the prospectus.

See

NASD Mutual Fund Task Force,

Report of the Mutual Fund Task Force: Mutual Fund Distribution

(Mar. 2005), available at

http://www.finra.org/web/groups/rules_regs/documents/rules_regs/p013690.pdf

(“NASD Mutual Fund Task Force Report”). The name of NASD has been changed to the Financial Industry Regulatory Authority, Inc. (“FINRA”).

See

ICI Investor Preferences Study,

supra

note 18, at 29 (“Nearly nine in 10 recent fund investors say they prefer a summary of the information they want to know before buying fund shares, either alone or along with a detailed document * * *. Just 13 percent prefer to receive only a detailed document.”); Barbara Roper and Stephen Brobeck, Consumer Federation of America,

Mutual Fund Purchase Practices

, at 13-14 (June 2006), available at

http://www.consumerfed.org/pdfs/mutual_fund_survey_report.pdf

(survey respondents more likely to consult a fund summary document rather than a prospectus or other written materials).

Similar opinions were voiced at a roundtable held by the Commission in June 2006, at which representatives from investor groups, the mutual fund industry, analysts, and others discussed how the Commission could change the mutual fund disclosure framework so that investors would be provided with better information. Significant discussion at the roundtable concerned the importance of providing mutual fund investors with access to key fund data in a shorter, more easily understandable format.

The participants focused on the importance of providing mutual fund investors with shorter disclosure documents, containing key information, with more detailed disclosure documents available to investors and others who choose to review additional information.

There was consensus among the roundtable participants that the key information that investors need to make an investment decision includes information about a mutual fund's investment objectives and strategies, risks, costs, and performance.

See, e.g.

, Henry H. Hopkins, Vice President and Chief Legal Counsel, T. Rowe Price Group, Inc., June 12 Roundtable Transcript,

supra

note 18, at 31 (“[S]hareholders prefer receiving a concise summary of fund information before buying.”).

See, e.g.

, Don Phillips, Managing Director, Morningstar, Inc.,

id.

at 27 (stating that mutual fund investors need two different documents, including a simplified print document and a tagged electronic document); Paul Schott Stevens, President and Chief Executive Officer, Investment Company Institute,

id.

at 72-73 (urging the Commission to consider permitting mutual funds to “deliver a clear, concise disclosure document * * * much like the profile prospectus” with a statement that additional disclosure is available on the funds' Web site or upon request in paper).

See, e.g.

, Barbara Roper, Director of Investor Protection, Consumer Federation of America,

id.

at 20 (noting that there is “agreement to the point of near unanimity about the basic factors that investors should consider when selecting a mutual fund. These closely track the content of the original fund profile with highest priority given to investment objectives and strategies, risks, costs, and past performance particularly as it relates to the volatility of past returns.”).

See also

Paul G. Haaga, Jr., Executive Vice President, Capital Research and Management Company,

id.

at 90 (stating that the Commission should “specify some minimum amounts of information” to provide investors with “something along the lines of the [fund] profile”);

Henry H. Hopkins, Vice President and Chief Legal Counsel, T. Rowe Price Group, Inc.,

id.

at 31 (“The profile is an excellent, well organized disclosure document whose content requirements were substantiated by SEC-sponsored focus groups and an industry pilot program.”).

The roundtable participants also discussed the potential benefits of increased Internet availability of fund disclosure documents, which include, among other things, facilitating comparisons among funds and replacing “one-size-fits-all” disclosure with disclosure that each investor can tailor to his or her own needs.

In recent years, access to the Internet has greatly expanded,

and significant strides have been made in the speed and quality of Internet connections.

The Commission has already harnessed the power of these technological advances to provide better access to information in a number of areas. Recently, for example, we created a program that permits issuers, on a voluntary basis, to submit to the Commission financial information and, in the case of mutual funds, key prospectus information, in an interactive data format that facilitates automated retrieval, analysis, and comparison of the information.

More recently, we proposed rules that would require mutual funds to provide the risk/return summary section of their prospectuses, and companies to provide their financial statements, to the Commission in interactive data format.

In addition, we recently adopted rules that provide all shareholders with the ability to choose whether to receive proxy materials in paper or via the Internet.

See, e.g.

, Paul Schott Stevens, President and Chief Executive Officer, Investment Company Institute,

id.

at 70-71 (stating that the Internet can serve as “far more than a stand-in for paper documents * * *. It can * * * put investors in control when it comes to information about their investments.”); Don Phillips, Managing Director, Morningstar, Inc.,

id.

at 49 (discussing “the ability to use the Internet as a tool for comparative shopping”).

Recent surveys show that Internet use among adults is at an all time high with approximately three quarters of Americans having access to the Internet.

See A Typology of Information and Technology Users

, Pew Internet & American Life Project, at 2 (May 2007), available at

http://www.pewinternet.org/pdfs/PIP_ICT_Typology.pdf; Internet Penetration and Impact

, Pew Internet & American Life Project, at 3 (Apr. 2006), available at

http://www.pewinternet.org/pdfs/PIP_Internet_Impact.pdf

. Further, while some have noted a “digital divide” for certain groups,

see, e.g.

, Susannah Fox,

Digital Divisions

, Pew Internet & American Life Project, at 1 (Oct. 5, 2005) (noting that certain groups lag behind in Internet usage, including Americans age 65 and older, African-Americans, and those with less education), others have noted that this divide may be diminishing for those groups.

See, e.g., Mutual Fund Shareholders' Use of the Internet, 2006

, Investment Company Institute, Research Fundamentals, at 7 (Oct. 2006), available at

http://www.ici.org/stats/res/fm-v15n6.pdf

(“Recent increases in Internet access among older shareholders * * * have narrowed the generational gap considerably. Today, shareholders age 65 or older are more than twice as likely to have Internet access than in 2000.”); Michel Marriott,

Blacks Turn to Internet Highway, and Digital Divide Starts to Close

, The New York Times (Mar. 31, 2006), available at:

http://www.nytimes.com/2006/03/31/us/31divide.html?ex=1301461200&en=6fd4e942aaaa04ad&ei=5088

(“African-Americans are steadily gaining access to and ease with the Internet, signaling a remarkable closing of the `digital divide' that many experts had worried would be a crippling disadvantage in achieving success.”).

See

John B. Horrigan,

Home Broadband Adoption 2007

, Pew Internet & American Life Project, at 1 (June 2007), available at

http://www.pewinternet.org/pdfs/PIP_Broadband%202007.pdf

(47% of all adult Americans had a broadband connection at home as of early 2007).

See

Investment Company Act Release No. 27884 (July 11, 2007) [72 FR 39290 (July 17, 2007)] (adopting rule amendments to enable mutual funds voluntarily to submit supplemental tagged information contained in the risk/return summary section of their prospectuses); Securities Act Release No. 8529 (Feb. 3, 2005) [70 FR 6556 (Feb. 8, 2005)] (adopting rule amendments to enable registrants voluntarily to submit supplemental tagged financial information).

Investment Company Act Release No. 28298 (June 10, 2008) [73 FR 35442 (June 23, 2008)]; Securities Act Release No. 8924 (May 30, 2008) [73 FR 32794 (June 10, 2008)].

Exchange Act Release No. 56135 (July 26, 2007) [72 FR 42222 (Aug. 1, 2007)].

As suggested by the participants at the June 2006 roundtable, advances in technology also offer a promising means to address the length and complexity of mutual fund prospectuses by streamlining the key information that is provided to investors, ensuring that access to the full wealth of information about a fund is immediately and easily accessible, and providing the means to present all information about a fund online in an interactive format that facilitates comparisons of key information, such as expenses, across different funds and different share classes of the same fund.

Technology has the potential to replace the current one-size-fits-all mutual fund prospectus with an approach that allows investors, their financial intermediaries, third-party analysts, and others to tailor the wealth of available information to their particular needs and circumstances.

A mutual fund may issue more than one class of shares that represent interests in the same portfolio of securities with each class, among other things, having a different arrangement for shareholder services or the distribution of securities, or both.

See

rule 18f-3 under the Investment Company Act [17 CFR 270.18f-3].

In November 2007, the Commission proposed an improved mutual fund disclosure framework that was intended to address the concerns that have been raised about mutual fund prospectuses and to make use of technological advances to enhance the provision of information to mutual fund investors. The Commission received approximately 155 comment submissions.

The commenters generally supported the proposals, with some commenters suggesting specific changes to the proposals. Commission staff also arranged for investor focus group testing of the proposed Summary Prospectus.

Today, the Commission is adopting the proposed amendments with modifications to respond to the focus group testing and to address commenters' recommendations.

In response to the ETF Proposing Release, the Commission received seven comment submissions that addressed the proposed ETF amendments to Form N-1A.

The Commission engaged a consultant to conduct focus group interviews and a telephone survey concerning investors' views and opinions about various disclosure documents filed by companies, including mutual funds. During this process, investors participating in focus groups were asked questions about a hypothetical Summary Prospectus. Investors participating in the telephone survey were asked questions relating to several disclosure documents, including mutual fund prospectuses. We have placed in the comment file (available at

http://www.sec.gov/comments/s7-28-07/s72807.shtml

) for the proposed rule the following documents from the investor testing that relate to mutual fund prospectuses and the proposed Summary Prospectus: (1) The consultant's report concerning focus group testing of the hypothetical Summary Prospectus and related disclosures (“Focus Group Report”); (2) transcripts of focus groups relating to the hypothetical Summary Prospectus and related disclosures (“Focus Group Transcripts”); (3) disclosure examples used in these focus groups; and (4) an excerpt from the consultant's report concerning the telephone survey of individual investors (“Telephone Survey Report”).

We are adopting amendments to Form N-1A that will require every prospectus to include a summary section at the front of the prospectus, consisting of key information about the fund, including investment objectives and strategies, risks, costs, and performance. This key information is required to be presented in plain English in a standardized order. Our intent is that this information will be presented succinctly, in three or four pages, at the front of the prospectus.

We are also adopting a new option for satisfying prospectus delivery obligations with respect to mutual fund securities under the Securities Act. Under the option, key information will be sent or given to investors in the form of a Summary Prospectus, and the statutory prospectus will be provided on an Internet Web site. Upon an investor's request, funds will also be required to send the statutory prospectus to the investor. Our intent in providing this option is that funds take full advantage of the Internet's search and retrieval capabilities in order to enhance the provision of information to mutual fund investors.

The disclosure framework that we are adopting has the potential to

revolutionize the provision of information to the millions of investors who rely on mutual funds for their most basic financial needs. It is intended to help investors who are overwhelmed by the choices among thousands of available funds described in lengthy and legalistic documents to access readily key information that is important to an informed investment decision. At the same time, by harnessing the power of technology to deliver information in better, more useable formats, the disclosure framework can help those investors, their intermediaries, third-party analysts, the financial press, and others to locate and compare facts and data from the wealth of more detailed disclosures that are available.

III. Discussion

A. Amendments to Form N-1A

The Commission is adopting, with modifications to address commenters' suggestions, amendments to Form N-1A that will require the statutory prospectus of every mutual fund to include a summary section at the front of the prospectus consisting of key information presented in plain English in a standardized order.

Commenters and investors participating in focus groups arranged by Commission staff generally supported the proposed summary presentation and agreed that it will address investors' preferences for concise, user-friendly information.

The summary section will provide investors with key information about the fund that investors can use to evaluate and compare the fund. This summary will be located in a standardized, easily accessible place and will be available to all investors, regardless of whether the fund uses a Summary Prospectus and whether the investor is reviewing the prospectus in a paper or electronic format.

The Commission is also adopting amendments to Form N-1A relating to exchange-traded funds.

See

discussion

infra

Part III.A.4.

See, e.g.

, Letter of AARP (Feb. 28, 2008) (“AARP Letter”); Letter of Capital Research and Management Company (Feb. 28, 2008) (“Capital Research Letter”); Letter of Fund Democracy, Consumer Federation of America, and Consumer Action (Feb. 28, 2008) (“Fund Democracy

et al.

Letter”); Letter of Investment Company Institute (Feb. 28, 2008) (“ICI Letter”); Letter of Mutual Fund Directors Forum (Feb. 28, 2008) (“MFDF Letter”); Letter of Morningstar, Inc. (Feb. 27, 2008) (“Morningstar Letter”); Focus Group Report,

supra

note 32, at 5.

As in our proposal, the information required in the summary section of the prospectus will be the same as that required in the new Summary Prospectus, and it is key information that is important to an investment decision. We believe, and commenters generally agreed,

that the key information that is important to an investment decision is the same, whether an investor is reviewing the summary section of a statutory prospectus or a short-form disclosure document. For that reason, we are requiring the same information in the summary section of the statutory prospectus and in the Summary Prospectus. In each case, our intent is that funds prepare a concise summary (on the order of three or four pages) that will provide key information.

See, e.g.

, Letter of Bo Li (Feb. 28, 2008) (“Bo Li Letter”); Letter of Data Communiqué, Inc. (Feb. 27, 2008) (“Data Communiqué Letter”); Letter of Firehouse Communications LLC (Feb. 29, 2008) (“Firehouse Letter”); Letter of L.A. Schnase (Feb. 26, 2008) (“Schnase Letter”).

But see

Letter of Kathleen K. Clarke (Mar. 4, 2008) (“Clarke Letter”).

In addition, with the exception of some information that is common to multiple funds, we are requiring, as proposed, that the summary section be presented separately for each fund covered by a multiple fund prospectus and that the information for multiple funds not be integrated.

This requirement is intended to assist investors in finding important information regarding the particular fund in which they are interested. Multiple fund prospectuses contribute substantially to prospectus length and complexity, which act as barriers to understanding. We have concluded that requiring a self-contained summary section for each fund will significantly aid investors' ability to use multiple fund prospectuses effectively.

General Instruction C.3.(c)(ii) of Form N-1A.

The Commission is committed to encouraging statutory prospectuses that are simpler, clearer, and more useful to investors. The prospectus summary section is intended to provide investors with streamlined disclosure of key mutual fund information at the front of the statutory prospectus, in a standardized order that facilitates comparisons across funds. We are adopting the following amendments to Form N-1A in order to implement the summary section.

1. General Instructions to Form N-1A

We are adopting, substantially as proposed, amendments to the General Instructions to Form N-1A to address the new summary section of the statutory prospectus. These amendments address plain English and organizational requirements.

Plain English

We are amending, as proposed, the General Instructions to state that the summary section of the prospectus must be provided in plain English under rule 421(d) under the Securities Act.

Rule 421(d) requires an issuer to use plain English principles in the organization, language, and design of the front and back cover pages, the summary, and the risk factors sections of its prospectus.

The amended instruction will serve as a reminder that the new prospectus summary section is subject to rule 421(d). The use of plain English principles in the new summary section will further our goal of encouraging funds to create useable summaries at the front of their prospectuses. The prospectus, in its entirety, also will remain subject to the requirement that the information be presented in a clear, concise, and understandable manner.

General Instruction B.4.(c) of Form N-1A; rule 421(d) [17 CFR 230.421(d)].

Commenters generally supported the use of plain English in the summary section.

See, e.g.

, AARP Letter,

supra

note 34; Letter of CFA Institute (Feb. 28, 2008) (“CFA Institute Letter”); Letter of Committee on Federal Regulation of Securities of the American Bar Association's Section of Business Law (Mar. 17, 2008) (“ABA Letter”); Letter of Investment Company Institute and Securities Industry and Financial Markets Association (Feb. 28, 2008) (“ICI and SIFMA Letter”).

Rule 421(d) lists the following plain English principles: (1) Short sentences; (2) definite, concrete, everyday words; (3) active voice; (4) tabular presentation or bullet lists for complex material, wherever possible; (5) no legal jargon or highly technical business terms; and (6) no multiple negatives.

Pursuant to rule 421(b) [17 CFR 230.421(b)], the following standards must be used when preparing prospectuses: (1) present information in clear, concise sections, paragraphs, and sentences; (2) use descriptive headings and subheadings; (3) avoid frequent reliance on glossaries or defined terms as the primary means of explaining information in the prospectus; and (4) avoid legal and highly technical business terminology. We note that these standards provide funds with flexibility, for example, in determining whether or not to use headings in a question-and-answer format.

Organizational Requirements

We are also adopting amendments to the organizational requirements of the General Instructions, with one modification to address commenters' suggestions. The amendments will require mutual funds to disclose the summary information in numerical order at the front of the prospectus and not to precede this information with any information other than the cover page or table of contents.

Commenters generally supported standardizing the order and content of the summary section, agreeing that a standardized summary section will enhance investor understanding and the ability to compare funds.

Information included

in the summary section need not be repeated elsewhere in the prospectus. While a fund may continue to include information in the prospectus that is not required, a fund may not include any such additional information in the summary section of the prospectus.

General Instruction C.3.(a) to Form N-1A.

See, e.g.

, Letter of Evergreen Investments (Feb. 28, 2008) (“Evergreen Letter”); Letter of Financial Services Institute (Feb. 28, 2008) (“Financial Services Institute Letter”).

General Instruction C.3.(b) of Form N-1A.

See, e.g.

, CFA Institute Letter,

supra

note 37; Letter of Great-West Retirement Services (Feb. 28, 2008) (“Great-West Letter”); ICI Letter,

supra

note 34; Letter of The Vanguard Group, Inc. (Feb. 28, 2008) (“Vanguard Letter”) (supporting prohibition on including information in the summary section that is not required).

As noted above, we are, with one exception, requiring as proposed that a multiple fund prospectus present the summary information for each fund sequentially and not integrate the information for more than one fund.

That is, a multiple fund prospectus will be required to present all of the summary information for a particular fund together, followed by all of the summary information for each additional fund. For example, a multiple fund prospectus will not be permitted to present the investment objectives for several funds followed by the fee tables for several funds. A multiple fund prospectus will also be required to identify clearly the name of the particular fund at the beginning of the summary information for that fund.

General Instruction C.3.(c)(ii) of Form N-1A.

See supra

note 36 and accompanying text.

Many commenters agreed that multiple fund prospectuses should present the summary information for each fund separately.

Some commenters stated that requiring a separate summary for each fund will better achieve the Commission's goal of keeping summaries short, which should help facilitate comparisons across funds.

Commenters also stated that multiple fund prospectuses often confuse investors and make reviewing key information for a single fund more difficult.

See, e.g.

, CFA Institute Letter,

supra

note 37; Letter of Coalition of Mutual Fund Investors (Feb. 13, 2008) (“CMFI Letter”); Fund Democracy

et al.

Letter,

supra

note 34; Evergreen Letter,

supra

note 41; MFDF Letter,

supra

note 34; Letter of the National Association of Personal Financial Advisors (Feb. 28, 2008) (“NAPFA Letter”); Letter of Oppenheimer Funds (Feb. 28, 2008) (“Oppenheimer Letter”).

See, e.g.

, Fund Democracy

et al.

Letter,

supra

note 34; Data Communiqué Letter,

supra

note 35.

See also

ICI Letter,

supra

note 34 (stating that some of its members believe that requiring a separate summary for each fund will better facilitate the Commission's goals of keeping documents short and facilitating comparisons across funds).

See, e.g.

, Data Communiqué Letter,

supra

note 35; CMFI Letter,

supra

note 44; Oppenheimer Letter,

supra

note 44.

A number of commenters, however, expressed reservations about the Commission's proposal to prohibit multiple fund summary sections, requesting that the Commission permit integrated summaries for multiple funds in at least some circumstances.

Some commenters suggested that integrated summary information would allow investors to better compare all funds within a fund family, or at least certain categories of funds within a fund family.

Categories of funds cited included international funds, asset allocation funds, and U.S. Treasury Funds.

In addition, some commenters argued that prohibiting multiple fund summaries would lead to unnecessary duplication of information and longer statutory prospectuses.

See,

e.g.

, Letter of AIM Investments (Feb. 27, 2008) (“AIM Letter”) (favoring integrated summaries for target date, asset allocation or lifestyle funds, and variable annuity funds); Capital Research Letter,

supra

note 34 (favoring integrated summaries for target date and variable annuity funds).

See,

e.g.

, AIM Letter,

supra

note 47; Letter of American Century Investments (Feb. 28, 2008) (“American Century Letter”); Clarke Letter,

supra

note 35; ICI Letter,

supra

note 34; Letter of Putnam Investments (Feb. 28, 2008) (“Putnam Letter”); Letter of Russell Investments (Feb. 28, 2008) (“Russell Letter”).

See,

e.g.

, Letter of T. Rowe Price Associates, Inc. (Feb. 28, 2008) (“T. Rowe Letter”) (favoring integrated summaries for certain categories of funds and citing focus group research conducted by T. Rowe Price concerning integrated versus single-fund summaries).

See,

e.g.

, AIM Letter,

supra

note 47; American Century Letter,

supra

note 48; Letter of Dechert LLP (Mar. 3, 2008) (“Dechert Letter”); Putnam Letter,

supra

note 48; Russell Letter,

supra

note 48.

See also

ICI Letter,

supra

note 34 (members split, with some noting that an integrated summary may be more useful to investors in certain circumstances, in particular for groups of funds an investor may wish to compare, and others believing that a separate document for each fund would better accomplish goals of keeping the document short and facilitating comparisons across funds).

A number of investors in our focus groups expressed the view that multiple fund presentations of mutual fund information could be helpful in facilitating useful comparisons among funds.

Some of these investors stated that multiple fund presentations could be used as a screening tool to determine which funds to research in more detail.

Some investors in our focus groups, however, indicated that combining too many funds within a single summary can result in confusing complexity.

The investors in our focus groups did not express a consensus on a specific limit on the number of funds or page length that would be appropriate in multiple fund presentations.

See

Focus Group Report,

supra

note 32, at 9.

See

Focus Group Transcripts,

supra

note 32, at 20.

. at 19 (“I thought there were too many in the [multiple fund prospectus]. It just really makes your head spin when you have to read all that.”), 22, 46.

While we believe that multiple fund presentations can, in limited circumstances, be useful in helping investors to compare funds, we have determined that prohibiting multiple fund summary sections is more consistent with the goal of achieving concise, readable summaries for investors. The requirement that summary information be separately presented for each fund in a multiple fund prospectus is intended to address the problem of lengthy and complex multiple fund prospectuses in the least intrusive manner possible. Multiple fund prospectuses contribute substantially to prospectus length and complexity, which act as barriers to investor understanding. We have concluded that permitting information for multiple funds to be integrated in the summary section would undermine our goal of providing mutual fund investors with concise and readable key information.

We note, however, that our rules do not restrict in any way the use of multiple fund presentations in advertising and sales materials, whether those materials are provided along with the Summary Prospectus or separately.

Funds have complete flexibility to prepare and present comparative information to investors regarding any grouping of multiple funds that they believe is useful, and also to provide automated tools on their Web sites permitting investors to choose which funds to compare. As a result, we do not believe that the prohibition on multiple fund summaries in the statutory prospectus will impair in any significant manner funds' ability to provide useful, comparative information to investors.

See

rule 482 under the Securities Act [17 CFR 230.482] and rule 34b-1 under the Investment Company Act [17 CFR 270.34b-1] (investment company advertising rules).

We are adopting one exception to the requirement that multiple fund prospectuses not integrate the summary information for more than one fund in order to eliminate duplicative information and reduce prospectus length. Two commenters recommended that the Commission permit summary information that is identical for multiple funds to be presented once, at the end of all the individual summaries within a multiple fund statutory prospectus.

We agree with these commenters that permitting integration of information that is likely to be uniform for multiple funds will further our goal of concise, user-friendly summary sections. Therefore, a multiple fund prospectus

will be permitted to integrate the information required by any of new Item 6 (purchase and sale of fund shares), Item 7 (tax information), and Item 8 (financial intermediary compensation) if it is identical for all funds covered in the prospectus.

This information is often uniform across multiple funds unlike, for example, information about investment objectives, costs, performance, or portfolio managers. If the information required by any of Items 6 through 8 is integrated, the integrated information will be required to immediately follow the separate individual fund summaries containing the other non-integrated information. In addition, a statement containing the following information will be required in each individual fund summary section in the location where the information that is integrated, and presented later, would have appeared.

See

Capital Research Letter,

supra

note 34; ICI Letter,

supra

note 34.

General Instruction C.3.(c)(iii) of Form N-1A. This exception will not be available to Summary Prospectuses delivered pursuant to new rule 498 because a Summary Prospectus may describe only one fund.

See

discussion

infra

Part III.B.2.a.

For important information about [purchase and sale of fund shares,] [tax information,] and [financial intermediary compensation], please turn to [identify section heading and page number of prospectus].

As proposed, the instructions will permit a fund with multiple share classes, each with its own cost structure, to present the summary information separately for each class, to integrate the information for multiple classes, or to use another presentation that is consistent with disclosing the summary information in a standard order at the beginning of the prospectus.

Commenters generally supported, or did not express a view with respect to, allowing multiple class summary sections; and some commenters noted that such sections would assist investors in choosing the class most appropriate for their circumstances.

We are not requiring the integration of information for multiple classes of a fund, which two commenters argued was important to facilitate cost comparisons.

We are retaining flexibility in this area because we believe that whether a multiple class presentation is helpful or overwhelming depends on the particular circumstances. We note, however, that our ongoing interactive data initiative is intended, among other things, to facilitate cost comparisons by investors across multiple classes of a single fund, as well as across different funds.

General Instruction C.3.(c)(ii) of Form N-1A.

See,

e.g.

, Clarke Letter,

supra

note 35; Data Communiqué Letter,

supra

note 35; Great-West Letter,

supra

note 42; Oppenheimer Letter,

supra

note 44.

See,

e.g.

, Fund Democracy

et al.

Letter,

supra

note 34; Letter of Brock Hastie (Jan. 8, 2008) (“Hastie Letter”).

See supra

note 28 and accompanying text.

Page Limits

As proposed, we are not imposing page limits on the summary section. We emphasize, however, that it is our intent that funds prepare a concise summary (on the order of three or four pages) that will provide key information. Commenters differed regarding whether the Commission should impose page limits on the summary.

Several commenters supported page limits. One commenter expressed concern that, in the absence of a page limit, the summary section would tend to expand over time, which would undermine its usefulness.

Another commenter noted that, absent page limits, lengths of summary sections would vary widely, hindering investors' ability to compare funds.

See

Letter of Independent Directors Council (Feb. 15, 2008) (“IDC Letter”).

See

Firehouse Letter,

supra

note 35.

See also

Letter of Jeffrey C. Keil (Jan. 9, 2008) (“Keil Letter”) (suggesting that summaries might garner more investor attention if limited to two or three pages).

While we share these commenters' concerns, especially with respect to the possibility of summary sections getting longer over time, we believe that these concerns are outweighed by the concerns of other commenters that page limits could constrain appropriate disclosure and lead funds to omit material information.

We also agree with a commenter who noted that the prohibition of multiple fund summary sections should help to limit their length.

See,

e.g.

, Letter of Janus Capital Group (Feb. 28, 2008) (“Janus Letter”); CMFI Letter,

supra

note 44.

See

Data Communiqué Letter,

supra

note 35.

Elimination of Separate Purchase and Redemption Document

As proposed, we are eliminating the provisions of Form N-1A that permit a fund to omit detailed information about purchase and redemption procedures from the prospectus and to provide this information in a separate document that is incorporated into and delivered with the prospectus, as well as a similar provision in the requirements for the statement of additional information (“SAI”).

We have concluded that this option is unnecessary in light of the new Summary Prospectus which could be used, at a fund's option, along with any additional sales materials, including a document describing purchase and redemption procedures.

The elimination of these provisions does not otherwise alter the information about purchase and redemption procedures that must appear in the fund's prospectus and SAI, and this information will continue to be required in those documents.

Instruction 6 to current Item 1(b) of Form N-1A; current Item 6(g) of Form N-1A; Instruction to current Item 18(a) of Form N-1A.

See

discussion

infra

Part III.B.1. Most commenters did not address this proposed change.

But see

Clarke Letter,

supra

note 35 (supporting change); Schnase Letter,

supra

note 35 (opposing change).

Variable Contract and Retirement Plan Funds

Finally, we are modifying the proposal to permit funds that are used as investment options for retirement plans and variable insurance contracts to modify or omit certain information required in the new summary section. This modification addresses commenters' concerns that certain information is not relevant to those funds.

Specifically, we are amending the General Instructions to Form N-1A to permit funds that are used as investment options for retirement plans and variable insurance contracts to modify or omit the information required by new summary section Item 6 (purchase and sale of fund shares).

Existing Form N-1A permits funds that are used as investment options for retirement plans and variable insurance contracts to modify or omit certain information regarding the purchase and sale of fund shares that is not relevant in these contexts.

The amendment we are making extends the same treatment to the purchase and sale information in the new summary section.

See

Letter of EQ Advisors Trust/AXA Premier VIP Trust (Feb. 28, 2008) (“EQ/AXA Letter”); Letter of Committee of Annuity Insurers (Feb. 28, 2008) (“CAI Letter”).

General Instruction C.3.(d)(i) of Form N-1A.

General Instruction C.3.(d)(i) of existing Form N-1A. We note that Item 7 of the summary section, which requires tax information that may not be relevant in the context of retirement plans and variable insurance contracts, expressly states that the disclosures are only required to be made,

as applicable

2. Exchange Ticker Symbols

We requested comment on whether we should require or permit a fund to include its ticker symbol in the summary, or on the front or back cover page of the statutory prospectus or SAI or elsewhere. Many commenters suggested that the Commission should require or permit funds to disclose their exchange ticker symbols.

We agree

with these commenters that requiring exchange ticker symbols to be included in fund disclosure documents would make it easier for investors to find information about particular funds and share classes of funds. Accordingly, we are requiring that a fund include its exchange ticker symbol on the cover pages of the statutory prospectus and SAI.

Specifically, a fund will be required to disclose the exchange ticker symbol of the fund's shares or, if the prospectus or SAI relate to one or more classes of the fund's shares, adjacent to each such class, the exchange ticker symbol of that class.

See,

e.g.

, CMFI Letter,

supra

note 44; Data Communiqué Letter,

supra

note 35; Firehouse Letter,

supra

note 35; Hastie Letter,

supra

note 59; Letter of William E. Kent (Dec. 26, 2007) (“Kent

Letter”); NAPFA Letter,

supra

note 44; Letter of Art Ticknor (Feb. 6, 2008) (“Ticknor Letter”).

Item 1(a)(2) of Form N-1A; Item 14(a)(2) of Form N-1A. Exchange ticker symbols will also be required on the cover page, or at the beginning of, the Summary Prospectus. Rule 498(b)(1)(ii).

3. Information Required in Summary Section

We are adopting the required content of the summary section substantially as proposed, except that, having considered commenters' concerns and the views of investors expressed in focus groups, we have determined not to require disclosure of a fund's portfolio holdings. The summary section of a mutual fund statutory prospectus will consist of the following information: (1) Investment objectives; (2) costs; (3) principal investment strategies, risks, and performance; (4) investment advisers and portfolio managers; (5) brief purchase and sale and tax information; and (6) financial intermediary compensation. These items will appear in the same order that we proposed. We have modified the requirements for some items to address comments and views expressed in the focus groups.

a. Elimination of Proposed Portfolio Holdings Requirement

The Commission has determined not to require the summary section to include the list of the fund's 10 largest holdings which we proposed.

As proposed, the top 10 holdings list would have been updated in the statutory prospectus on an annual basis and in the Summary Prospectus on a quarterly basis.

Proposed Item 5 of Form N-1A.

Section 10(a)(3) of the Securities Act [15 U.S.C. 77j(a)(3)] generally requires that when a prospectus is used more than nine months after the effective date of the registration statement, the information in the prospectus must be as of a date not more than sixteen months prior to such use. The effect of this provision is to require mutual funds to update their prospectuses annually to reflect current cost, performance, and other financial information.

See

proposed rule 498(b)(2)(iii) (proposed Summary Prospectus quarterly updating requirement).

Commenters were split regarding whether the top 10 portfolio holdings should be required in the summary section. We are persuaded by the commenters who pointed out the limited utility of the proposed top 10 holdings list.

Commenters expressed the view that top 10 holdings information may mislead investors because the top 10 holdings may not accurately represent a fund's overall holdings

and because the top 10 holdings information may become stale.

Commenters also pointed out that portfolio holdings information is already widely available through other sources, such as shareholder reports and other Commission filings,

as well as fund Web sites and sales materials.

See,

e.g.

, AIM Letter,

supra

note 47; Letter of Cornell Securities Law Clinic (Feb. 28, 2008) (“Cornell Law Clinic Letter”); Evergreen Letter,

supra

note 41; Letter of Foreside Compliance Services, LLC (Feb. 28, 2008) (“Foreside Letter”); Oppenheimer Letter,

supra

note 44; Russell Letter,

supra

note 48.

Other commenters supported including the top 10 portfolio holdings in the summary section.

See,

e.g.

, CMFI Letter,

supra

note 44; Data Communiqué Letter,

supra

note 35; Firehouse Letter,

supra

note 35; Letter of Jill Gross (Feb. 28, 2008); Letter of Richard K. Hopkins (Feb. 15, 2008) (“Hopkins Letter”); Letter of Richard McCormick (Feb. 11, 2008) (“McCormick Letter”); Letter of William Mahavier (Feb. 10, 2008) (“Mahavier Letter”); Letter of Dan Meador (Feb. 12, 2008); NAPFA Letter,

supra

note 44; Letter of Bruce R. Bent (Feb. 28, 2008) (“Bent Letter”).

See,

e.g.

, Dechert Letter,

supra

note 50 (top 10 holdings information could mislead investors of a diversified fund where top 10 holdings represent a relatively small percentage of the fund's holdings); ICI Letter,

supra

note 34 (noting that a fund's top 10 holdings may be misleading for funds in a master-feeder structure, funds of funds, fixed income funds, index funds, money market funds, exchange-traded funds, and new funds); Letter of New York City Bar (Feb. 25, 2008) (“NYC Bar Letter”) (arguing that for certain types of funds, such as money market funds, fixed income funds, and index funds, top 10 holdings information may be misleading); Letter of Leslie L. Ogg (Feb. 1, 2008) (“Ogg Letter”) (noting that top 10 holdings information can be misleading for multi-manager funds, funds of funds, long-short funds, and funds using derivative instruments).

See,

e.g.

, AIM Letter,

supra

note 47; CAI Letter,

supra

note 67; Capital Research Letter,

supra

note 34; Clarke Letter,

supra

note 35; Dechert Letter,

supra

note 50; ICI Letter,

supra

note 34; IDC Letter,

supra

note 61; Janus Letter,

supra

note 63; NYC Bar Letter,

supra

note 75; Oppenheimer Letter,

supra

note 44; Russell Letter,

supra

note 48.

Form N-CSR [17 CFR 249.331; 17 CFR 274.128] (form used by investment companies semi-annually to file certified shareholder reports); Form N-Q [17 CFR 249.332; 17 CFR 274.130] (form used by investment companies to file schedule of portfolio holdings for first and third quarters).

See,

e.g.

, AIM Letter,

supra

note 47; EQ/AXA Letter,

supra

note 67; Evergreen Letter,

supra

note 41; Russell Letter,

supra

note 48; T. Rowe Letter,

supra

note 49.

We continue to believe that information concerning a fund's portfolio holdings may provide investors with a greater understanding of a fund's stated investment objectives and strategies and may assist investors in making more informed asset allocation decisions. In light of the limited utility of top 10 holdings information, however, and the widespread availability of portfolio holdings information from other sources, we have determined not to require this information in the summary section. Some commenters and investors in our focus groups suggested that we instead require disclosure about the current allocation of a fund's portfolio by asset type, such as a pie chart that would graphically display this information.

We have determined not to require this information because we have concluded that it is subject to the same concerns about staleness as top 10 holdings information and because of the widespread availability of portfolio holdings information from other sources. Nonetheless, where a fund's asset allocation strategy is a principal investment strategy of the fund, the fund should clearly disclose this strategy,

and we would encourage the use of graphical representations as a potentially helpful communications tool.

See,

e.g.

, Cornell Law Clinic Letter,

supra

note 74; Oppenheimer Letter,

supra

note 44; Focus Group Report,

supra

note 32, at 6.

Items 4(a) and 9 of Form N-1A (requiring disclosure of principal investment strategies).

In reaching our determination with respect to portfolio holdings information, we carefully considered the views of investors expressed in our focus groups. Many investors in the focus groups expressed significant interest in portfolio holdings information.

At the same time, like the commenters, a number of the investors participating in our focus groups pointed out that top 10 portfolio holdings information changes frequently and can quickly become outdated, and some participants acknowledged that the top 10 holdings information can sometimes account for a relatively small portion of a fund's holdings.

We concluded that investors' interest in this information is outweighed by its potential to mislead and confuse in the context of the summary section of a prospectus. Because this information is widely available through other sources, we are persuaded that investors' interest in this information can be satisfied through these other sources.

Focus Group Report,

supra

note 32, at 7; Focus Group Transcripts,

supra

note 32, at 12.

Focus Group Report,

supra

note 32, at 7; Focus Group Transcripts,

supra

note 32, at 13-14, 78.

b. Order of Information

We are adopting the order of the information required in the summary

section, as proposed. This includes moving the fee table forward from its current location, which follows information about investment strategies, risks, and past performance. We continue to believe that the change to the location of the fee table will enhance the prominence of this information, which is important to address continuing concerns about investor understanding of mutual fund costs.

Several commenters agreed that relocation of the fee table will place fee information in a more prominent location and encourage investors to give greater attention to costs and cost comparisons.

While several commenters suggested alternative orders for the information in the summary section, there was no consensus by commenters regarding any alternative.

See

Barbara Roper, Director of Investor Protection, Consumer Federation of America, June 12 Roundtable Transcript,

supra

note 18, at 21; James J. Choi, David Laibson, & Brigitte C. Madrian, National Bureau of Economic Research,

Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds

, at 6 (May 2006), available at

http://www.nber.org/papers/w12261.pdf.

; Focus Group Transcripts,

supra

note 32, at 6 (“[The hypothetical summary prospectus] shows the fee right up there, what they charge, so that would appeal to me.”).

See,

e.g.

, Letter of Roy J. Biegel (Feb. 14, 2008) (“Biegel Letter”); CFA Institute Letter,

supra

note 37; Foreside Letter,

supra

note 74; Letter of Fund Democracy and Consumer Federation of America (Apr. 17, 2008); NAPFA Letter,

supra

note 44; Letter of Charles Sikorovsky (Feb. 29, 2008) (“Sikorovsky Letter”).

See also

Focus Group Transcripts,

supra

note 32, at 10 (investors expressed view that fund costs are important); Letter of Investment Company Institute (Mar. 14, 2008) (“ICI Survey”) (finding that 95% of respondents believed that fees are important).

See,

e.g.

, Letter of Ward C. Bourn (Feb. 27, 2008); Capital Research Letter,

supra

note 34; Evergreen Letter,

supra

note 41; Financial Services Institute Letter,

supra

note 41; Vanguard Letter,

supra

note 42.

A number of commenters, largely from the fund industry, opposed relocating the fee table. These commenters argued that moving the fee table forward inappropriately overemphasizes costs over other more important information and that the fee table should not come between investment objectives and principal investment strategies and risks.

Some of these commenters argued that the fee table should not be moved forward, because it is important for investors to first and foremost understand a fund and its risks, and that a fund's objectives, strategies, and risks provide necessary context for fees. Some commenters also argued that moving the fee table forward is unnecessary because the short length of the summary section will make the fee table sufficiently prominent.

See,

e.g.

, AIM Letter,

supra

note 47; Evergreen Letter,

supra

note 41; Letter of Fidelity Investments (Feb. 28, 2008) (“Fidelity Letter”); ICI Letter,

supra

note 34; Oppenheimer Letter,

supra

note 44; Russell Letter,

supra

note 48; T. Rowe Letter,

supra

note 49.

We are not persuaded by these commenters. We continue to believe, along with a number of commenters, that placement of the fee table in a more prominent location will encourage investors to give greater attention to costs. The fee table and example are designed to help investors understand the costs of investing in a fund and compare those costs with the costs of other funds. Placing the fee table and example at the front of the summary section reflects the importance of costs to an investment decision.

Moving the fee table forward also eliminates the possibility that the fee table could be obscured by other information.

For example, a 1% increase in annual fees reduces an investor's return by approximately 18% over 20 years.

See

Sikorovsky Letter,

supra

note 84 (stating that if an investment manager can in any way “hide” fees from an investor, the document has failed to fulfill its function).

c. Investment Objectives and Goals

We are adopting, as proposed, the requirement that the summary section begin with disclosure of a fund's investment objectives or goals, which commenters generally supported.

As proposed, a fund also will be permitted to identify its type or category (

e.g.

, that it is a money market fund or balanced fund).

See,

e.g.

, AARP Letter,

supra

note 34; Firehouse Letter,

supra

note 35; ICI and SIFMA Letter,

supra

note 37; Letter of Christine A. Nelson (Feb. 12, 2008); Schnase Letter,

supra

note 35.

See also

ICI Survey,

supra

note 84 (providing survey results that found investment objectives was one of the most important pieces of information to investors).

Item 2 of Form N-1A.

d. Fee Table

We are adopting, with modifications to address commenters' concerns and views expressed by investors in the focus groups, the fee table and example. The fee table and example disclose the costs of investing and immediately follow the fund's investment objectives.

Item 3 of Form N-1A.

Breakpoint Discounts

We are requiring, substantially as proposed, that mutual funds that offer discounts on front-end sales charges for volume purchases (so-called “breakpoint discounts”) include brief narrative disclosure alerting investors to the availability of those discounts.

Commenters generally supported the disclosure about breakpoint discounts, although many commenters, as well as focus group investors, provided suggestions for revising the narrative proposed.

We are modifying the proposal in two ways to address these comments.

Item 3 of Form N-1A; Instruction 1(b) to Item 3 of Form N-1A.

See,

e.g.

, AIM Letter,

supra

note 47; CFA Institute Letter,

supra

note 37; Fund Democracy

et al.

Letter,

supra

note 34; Letter of Manuela A. De Leon (Feb. 7, 2008); ICI Letter,

supra

note 34; Keil Letter,

supra

note 62; NAPFA Letter,

supra

note 44; Oppenheimer Letter,

supra

note 44; Russell Letter,

supra

note 48; Focus Group Report,

supra

note 32, at 8.

First, we are adding to the required narrative a description of where investors can find additional information regarding breakpoint discounts.

Specifically, the narrative will be required to state that further information is available from the investor's financial professional, as well as identify the section heading and page number of the fund's prospectus and SAI where more information can be found. This information is intended to address the views of both commenters and investors in the focus groups that it would be helpful for more detailed information about breakpoint discounts to be readily available to investors.

Item 3 of Form N-1A.

See,

e.g.

, CMFI Letter,

supra

note 44 (summary should indicate where additional information about breakpoint discounts is available); NAPFA Letter,

supra

note 44 (same); Focus Group Transcripts,

supra

note 32, at 17 (participant observes that “I'll go to the long-form and look that up and then make my decision.”).

Second, we are clarifying the instruction that the dollar level at which investors may qualify for breakpoint discounts that is required to be disclosed in the new item is the minimum level of investment required to qualify for a discount as disclosed in the table required by current Item 7(a)(1) of Form N-1A.

This change makes clear that the required dollar threshold to be disclosed is the same as disclosure that is already required in Form N-1A. This change, together with the added narrative about additional information, addresses commenters' concerns that the breakpoints disclosure does not capture the complexity and variety of policies regarding breakpoint discounts.

Instruction 1(b) to Item 3 of Form N-1A. Item 7 of Form N-1A is being renumbered as Item 12 in this rulemaking.

See,

e.g.

, AIM Letter,

supra

note 47; ICI Letter,

supra

note 34; Russell Letter,

supra

note 48; Letter of Securities Industry and Financial Markets Association (Feb. 28, 2008) (“SIFMA Letter”).

Parenthetical to “Annual Fund Operating Expenses”

We are adopting, substantially as proposed, revisions to the heading “Annual Fund Operating Expenses” in the fee table. Specifically, we are revising the parenthetical following the

heading to read “expenses that you pay each year as a percentage of the value of your investment” in place of “expenses that are deducted from Fund assets.”

In recent years, we have taken significant steps to address concerns that investors do not understand that they pay costs every year when they invest in mutual funds, including requiring disclosure of these costs in shareholder reports.

Our revision further addresses those concerns by making clear that the expenses in question are paid by investors as a percentage of the value of their investments in the fund.

Item 3 of Form N-1A.

Item 27(d)(1) of Form N-1A; Investment Company Act Release No. 26372 (Feb. 27, 2004) [69 FR 11244 (Mar. 9, 2004)] (adopting disclosure of costs in shareholder reports).

See also General Accounting Office Report on Mutual Fund Fees: Additional Disclosure Could Encourage Price Competition

, at 66-81 (June 2000), available at

http://www.gao.gov/archive/2000/gg00126.pdf

(discussing lack of investor awareness of the fees they pay and investor focus on mutual fund sales charges rather than recurring fees).

Many commenters supported the Commission's proposed revision.

100

We have deleted the word “ongoing” from the beginning of the parenthetical language to address commenters’ concerns that this term incorrectly suggests that fund operating expenses are the same each year.

101

We are not modifying the parenthetical to address the views of some industry commenters that the statement incorrectly implies that shareholders directly pay fund expenses, when in fact expenses are paid out of fund assets.

102

The purpose of the revision is to make clear to investors that they, in fact, bear these expenses, and the proposed language conveys this fact. Our conclusion is supported by commenters representing investor groups.

103

100

See,

e.g.

, CFA Institute Letter,

supra

note 37; Clarke Letter,

supra

note 35; Fund Democracy

et al.

Letter,

supra

note 34.

101

See,

e.g.

, CFA Institute Letter,

supra

note 37; Clarke Letter,

supra

note 35; Fund Democracy

et al.

Letter,

supra

note 34; Evergreen Letter,

supra

note 41; Letter of Fenimore Asset Management (Feb. 28, 2008); Fidelity Letter,

supra

note 86; MFDF Letter,

supra

note 34; Oppenheimer Letter,

supra

note 44; T. Rowe Letter,

supra

note 49.

102

See,

e.g.

, Evergreen Letter,

supra

note 41; ICI Letter,

supra

note 34; Oppenheimer Letter,

supra

note 44; Putnam Letter,

supra

note 48; Russell Letter,

supra

note 48; T. Rowe Letter,

supra

note 49.

103

See

Fund Democracy

et al.

Letter,

supra

note 34.

Portfolio Turnover Rate

We are adopting, with two modifications, the requirement that funds, other than money market funds, include brief disclosure regarding portfolio turnover immediately following the fee table example.

104

A fund will be required to disclose its portfolio turnover rate for the most recent fiscal year as a percentage of the average value of its portfolio. This numerical disclosure will be accompanied by a brief explanation of the effect of portfolio turnover on transaction costs and fund performance. Some concerns have been expressed in recent years regarding the degree to which investors understand the effect of portfolio turnover, and the resulting transaction costs, on fund expenses and performance.

105

The requirement to provide brief portfolio turnover disclosure in the summary section of the prospectus is intended to address these concerns, and the proposed disclosure received support from a significant number of commenters.

106

Because we believe that it is important to address investors' lack of understanding of the effect of portfolio turnover and transaction costs on fund expenses and performance, we disagree with commenters opposing the disclosure of portfolio turnover rate on the grounds that such information is too complicated or unnecessary for the summary section.

107

104

Instruction 5 to Item 3 of Form N-1A.

105

See

Investment Company Act Release No. 26313 (Dec. 18, 2003) [68 FR 74820 (Dec. 24, 2003)] (request for comment regarding ways to improve disclosure of transaction costs); Report of the Mutual Fund Task Force on Soft Dollars and Portfolio Transaction Costs (Nov. 11, 2004), available at

http://www.finra.org/web/groups/rules_regs/documents/rules_regs/p012356.pdf

106

See,

e.g.

, Biegel Letter,

supra

note 84; CFA Institute Letter,

supra

note 37; CMFI Letter,

supra

note 44; Fund Democracy

et al.

Letter,

supra

note 34; IDC Letter,

supra

note 61; Mahavier Letter,

supra

note 74; NAPFA Letter,

supra

note 44; Schnase Letter,

supra

note 35; Vanguard Letter,

supra

note 42.

See also

ICI Letter,

supra

note 34 (stating that it does not oppose the disclosure).

107

See,

e.g.

, American Century Letter,

supra

note 48; Capital Research Letter,

supra

note 34; Clarke Letter,

supra

note 35; Evergreen Letter,

supra

note 41; Foreside Letter,

supra

note 74; McCormick Letter,

supra

note 74; Oppenheimer Letter,

supra

note 44; Russell Letter,

supra

note 48.

We are modifying the proposed required explanation of the effect of portfolio turnover to require that the explanation also address the adverse tax consequences that may result from a higher portfolio turnover rate when fund shares are held in a taxable account. We agree with commenters who suggested that adverse tax consequences, as well as higher transaction costs, should be expressly addressed by the explanation.

108

We are also making a technical revision to the final sentence of the proposed required explanation.

109

108

See

Fund Democracy

et al

. Letter,

supra

note 34; Letter from Representative Donald A. Manzullo (Feb. 26, 2008) (“Manzullo Letter”).

109

Item 3 of Form N-1A. We are deleting the reference to portfolio turnover rate as a percentage of the average value of the fund's “whole” portfolio in the explanation to reflect the fact that the rate is calculated without reference to securities whose maturities at the time of acquisition are one year or less.

See

Instruction 4(d)(ii) to current Item 8(a) of Form N-1A (describing how to calculate portfolio turnover rate; current Item 8 is being renumbered as Item 13).

We have determined not to adopt two significant suggestions that were made by commenters: First, that we require the impact of transaction costs to be reflected in a fund's expense ratio in the fee table and, second, that we require disclosure of portfolio turnover rates over a period greater than one year. While we believe that both of these suggestions have considerable merit, we have concluded that it is not feasible to implement either at the present time as discussed further below.

Several commenters expressed the view that the Commission should require that transaction costs be reflected in a fund's expense ratio in the fee table and that this disclosure would be more meaningful to investors than the rate of portfolio turnover.

110

The comments on this rulemaking, however, do not provide an adequate basis for prescribing a specific and accurate methodology for reflecting transaction costs in a fund's expense ratio.

111

We do agree with the commenters that portfolio turnover rate is an imperfect measure of portfolio transaction costs. While a higher portfolio turnover rate tends to result in higher transaction costs and a lower portfolio turnover rate tends to result in lower transaction costs, there is not necessarily a direct correlation between portfolio turnover rate and portfolio transaction costs. Nonetheless, in the absence of a basis for prescribing a better measure, we believe that portfolio turnover rate, though imperfect, is an appropriate indicator of transaction costs for purposes of the summary section.

110

See,

e.g.

, Fund Democracy

et al

. Letter,

supra

note 34; Letter from Representative George Miller, Senator Edward M. Kennedy, Representative Robert E. Andrews, Senator Tom Harkin, and Senator Herb Kohl (Mar. 13, 2008) (“Miller Letter”).

111

In addition, in 2003 the Commission issued a concept release that sought public comment on a number of issues related to the disclosure of mutual fund transaction costs.

See

Investment Company Act Release No. 26313,

supra

note 105, 68 FR at 74820. While most commenters who responded to the concept release felt that there should be greater transparency of mutual fund transaction costs, there was a wide range of opinions on what should be disclosed.

A number of commenters argued that disclosing a portfolio turnover rate over a one-year period would not yield a representative portfolio turnover rate because portfolio turnover rates vary significantly over time depending on a variety of factors, including the need to meet redemption requests, unexpected cash inflows due to sharp swings in

markets, or the occurrence of a significant event not likely to repeat in future years, such as a fund merger or a new portfolio manager restructuring the fund's holdings.

112

These commenters suggested that the Commission address this concern by, for example, requiring funds to disclose year-by-year turnover rates for a longer period (

e.g.

, 5-10 years) or an average turnover rate over a longer period of time (

e.g.

, five years).

113

We believe that requiring year-by-year turnover rates for multiple years in the summary section would not further our goal of providing concise, user-friendly disclosure, particularly in light of the fact that there is not necessarily a direct correlation between portfolio turnover and transaction costs. We note that portfolio turnover rates for each of the past five years are already required elsewhere in the prospectus.

114

We do not believe that there is a sufficient basis in the comments to require disclosure of an average turnover rate over a longer period of time (

e.g.

, five years). Doing so would require us to address a number of questions that have not been subject to adequate comment in this rulemaking, including devising a calculation methodology and addressing questions of comparability across funds that have been in existence for different periods of time.

112

See, e.g.

, CMFI Letter,

supra

note 44; Firehouse Letter,

supra

note 35; IDC Letter,

supra

note 61.

113

See, e.g.

, CMFI Letter,

supra

note 44; Mahavier Letter,

supra

note 74.

114

Item 13(a) of Form N-1A.

Expense Reimbursement and Fee Waiver Arrangements

Finally, we are adopting, with modifications to address commenters' recommendations, the proposed amendments to the requirement that a fund disclose in its fee table gross operating expenses that do not reflect the effect of expense reimbursement or fee waiver arrangements, which result in reduced expenses being paid by the fund.

115

The adopted amendments will permit a fund to place two additional captions directly below the “Total Annual Fund Operating Expenses” caption in cases where there are expense reimbursement or fee waiver arrangements that will reduce any fund operating expenses for no less than one year from the effective date of the fund's registration statement.

116

We have eliminated the proposed requirement that the reimbursement or waiver arrangement has reduced operating expenses in the past, as suggested by two commenters, because this is irrelevant to the impact that the arrangements will have in the future.

117

The purpose of the permitted line items is to show investors how the arrangements will affect expenses in the future and not how they have affected expenses in the past.

118

115

Instruction 3(d)(i) and 6(a) to Item 3 of Form N-1A. In an expense reimbursement arrangement, the adviser reimburses the fund for expenses incurred. Under a fee waiver arrangement, the adviser agrees to waive a portion of its fees in order to limit fund expenses.

116

Instruction 3(e) to Item 3 of Form N-1A. A fund may not include the additional captions if the expense reimbursement or fee waiver arrangement may be terminated without agreement of the fund's board of directors (

e.g.

, unilaterally by the fund's investment adviser) during the one-year period. If a fee waiver or expense reimbursement arrangement, in fact, terminates less than a year after the effective date of a fund's registration statement, the fund generally would be required to supplement or “sticker” its prospectus to reflect the termination. The “sticker” would be filed with the Commission in accordance with rule 497 under the Securities Act.

117

Instruction 3(e) to Item 3. We are also making a similar change in the instructions to the fee table example. Instruction 4(a) to Item 3.

See, e.g.

, Dechert Letter,

supra

note 50; Evergreen Letter,

supra

note 41.

118

Because expense reimbursement and fee waiver arrangements of new funds will be disclosed in the same manner as existing funds as a result of the elimination of the proposed requirement described in the text, we are eliminating current Instruction 5(b) (renumbered as Instruction 6(b) in the Proposing Release) to Item 3 of Form N-1A, which pertains to new funds, rather than adopting the proposed revision to the Instruction.

One caption will show the amount of the expense reimbursement or fee waiver, and a second caption will show the fund's net expenses after subtracting the fee reimbursement or expense waiver from the total fund operating expenses. Funds that disclose these arrangements will also be required to disclose the period for which the expense reimbursement or fee waiver arrangement is expected to continue, including the expected termination date, and briefly describe who can terminate the arrangement and under what circumstances. We are adding an express requirement that the expected termination date of the arrangement be disclosed in order to address a commenter's concern that investors should be informed in cases where the commitment on a fee waiver becomes shorter than one year.

119

See, e.g.

, Fund Democracy

et al.

Letter,

supra

note 34.

In computing the fee table example, a fund will be permitted to reflect any expense reimbursement or fee waiver arrangements that will reduce any operating expenses for no less than one year from the effective date of the fund's registration statement.

120

This adjustment may be reflected only in the periods for which the expense reimbursement or fee waiver arrangement is expected to continue. For example, if such an arrangement were expected to continue for one year, then, in the computation of 10-year expenses in the fee table example, the arrangement could only be reflected in the first of the 10 years.

121

120

Instruction 4(a) to Item 3 of Form N-1A. We have modified this instruction from the proposal to eliminate the requirement that the arrangement has reduced fund operating expenses during the most recently completed calendar year. This modification is consistent with the modification that is described at notes 117 and 118 and the accompanying text.

We are also adopting, as proposed, a technical amendment to the instructions to the expense example to eliminate language permitting funds to reflect the impact of the amortization of initial organization expenses in the expense example numbers.

Id.

This language is unnecessary because initial organization expenses must be expensed as incurred and may no longer be capitalized.

See

American Institute of Certified Public Accountants, Statement of Position 98-5,

Reporting on the Costs of Start-Up Activities

(Apr. 3, 1998).

121

A fund may not reflect the arrangement in any period during which the arrangement may be terminated without agreement of the fund's board of directors (

e.g.

, unilaterally by the fund's investment adviser).

Commenters made several suggestions with respect to cost disclosure that we have determined not to implement at this time. First, a number of commenters suggested that the fee table in the summary section should simply disclose the total fees and expenses and should omit certain line item breakdowns of expenses that are currently required in the statutory prospectus.

122

Commenters argued that a more abbreviated presentation, such as a fund's total expense ratio, is preferable because they argued that the current breakdown of fees is not crucial information to an investor's investment decision.

123

We believe that this idea deserves further consideration, and we will consider it for possible future rulemaking.

122

See, e.g.

, Capital Research Letter,

supra

note 34; Evergreen Letter,

supra

note 41; Fund Democracy

et al.

Letter,

supra

note 34.

123

See

Fund Democracy

et al.

Letter,

supra

note 34.

Second, some commenters suggested that we consider alternative terms to describe sales loads or rule 12b-1 fees

124

because the terms are not easily understood by most investors.

125

We have concluded that it is more appropriate to consider these changes in the context of a full reconsideration of

sales charges and rule 12b-1 rather than in the current rulemaking.

126

124

“Rule 12b-1 fees” or “12b-1 fees” are fees paid out of fund assets pursuant to a distribution plan adopted under rule 12b-1 under the Investment Company Act [17 CFR 270.12b-1].

125

See, e.g.

, Miller Letter,

supra

note 110; CFA Institute Letter,

supra

note 37; Manzullo Letter,

supra

note 108; Letter of Investor Rights Clinic at Pace University School of Law (Feb. 28, 2008) (“Pace Letter”).

126

The Commission last year hosted a roundtable that brought together representatives from mutual funds, financial services companies, and investor advocacy groups to discuss issues relating to rule 12b-1.

See

Commission Roundtable on Rule 12b-1 (Jun. 19, 2007) available at

http://www.sec.gov/spotlight/rule12b-1.htm

. Following the roundtable, we sought public comment on these topics and have received almost 1,500 comment letters.

Finally, some commenters suggested that the fee table require some form of comparison of the fund's fees to a relevant benchmark based on the fees of similar funds.

127

The Commission shares the commenters' view that the ability to compare fees across mutual funds is extremely important to investors. To facilitate this comparison, we have designed the summary section to provide investors with key information in a standardized order. We also note that the Commission's ongoing interactive data initiative is intended to provide investors and other users with the tools necessary to facilitate comparisons of fee information. The Commission recently proposed rules that would, if adopted, require mutual funds to file the information in their fee tables in an interactive data format that would facilitate automated analysis of the information and comparison to other funds.

128

The interactive data format would allow users of fee table information to download cost and performance information directly into spreadsheets and analyze it using commercial off-the-shelf software.

127

See, e.g.

, AARP Letter,

supra

note 34; Fund Democracy

et al.

Letter,

supra

note 34; Letter of Gary M. Keenan (Feb. 14, 2008).

128

See

Investment Company Act Release No. 28298,

supra

note 28, 73 FR at 35442.

e. Investments, Risks, and Performance

Following the fee table and example, we are requiring, substantially as proposed, that a fund disclose its principal investment strategies and risks.

129

This includes the current bar chart and table illustrating the variability of returns and showing the fund's past performance.

129

Item 4 of Form N-1A. To conform to other changes we are adopting to Form N-1A, the Instructions to Item 4 contain technical revisions that (1) amend cross-references to other Items in Form N-1A; and (2) eliminate language related to the presentation of performance information for more than one fund, given the requirement that information for each fund be presented separately. Instructions 2(e) and 3 to Item 4(b)(2) of Form N-1A.

We are modifying the narrative that is required to accompany the bar chart and performance table in one respect to address the views expressed by both focus group investors and commenters. A fund that makes updated performance information available on a Web site or at a toll-free (or collect) telephone number will be required to include a statement explaining this and providing the Web site address and/or telephone number.

130

A number of investors in focus groups expressed the view that the availability of updated performance information, particularly at a Web site, would be helpful.

131

In addition, many industry commenters noted that funds routinely make updated performance information available to investors either by Internet Web site or by telephone and suggested that the summary section direct investors to this information.

132

Particularly in light of our determination not to require quarterly updating of the Summary Prospectus, which is discussed below,

133

we believe that it will be helpful to investors for the summary section to indicate where updated performance information may be found.

130

Item 4(b)(2)(i) of Form N-1A.

131

See

Focus Group Report,

supra

note 32, at 11;

see, e.g.

, Focus Group Transcripts,

supra

note 32, at 49, 78.

132

See, e.g.

, AIM Letter,

supra

note 47; American Century Letter,

supra

note 48; Capital Research Letter,

supra

note 34; Fidelity Letter,

supra

note 86; ICI Letter,

supra

note 34; Janus Letter,

supra

note 63; Oppenheimer Letter,

supra

note 44; Putnam Letter,

supra

note 48; Russell Letter,

supra

note 48; T. Rowe Letter,

supra

note 49.

133

See

discussion

infra

Part III.B.2.c.

We are not modifying the required bar chart and performance table to add additional comparative information as suggested by several commenters.

134

Currently, funds are required to include an appropriate broad-based securities market index in the performance table.

135

We have determined not to require additional comparative performance information at this time because we are concerned that it would tend to undermine our goal of a concise, user-friendly summary of key information by contributing to the length and complexity of the summary section. Further, as with cost information,

136

we believe that it is preferable for investors and other users of the prospectus to be given the flexibility to make a variety of performance benchmark comparisons. Our ongoing interactive data initiative is intended to provide the tools necessary to facilitate dynamic comparisons of this type, and we note that the information in the bar chart and performance table is covered by our recently proposed rules that would, if adopted, require mutual funds to file information in an interactive data format.

137

134

See, e.g.

, Letter of Scott Hastings (Feb. 11, 2008) (suggesting comparative disclosure of the portfolio manager's stated benchmark); Morningstar Letter,

supra

note 34 (same).

135

Current Item 2(c)(2)(iii) of Form N-1A; Instruction 5 to current Item 22(b)(7) of Form N-1A. A fund is also permitted to include information for one or more other indexes. Instruction 6 to current Item 22(b)(7) of Form N-1A. If an additional index is included, a fund is required to disclose information about the additional index in the narrative explanation accompanying the bar chart and table (

e.g.

, by stating that the information shows how the fund's performance compares with the returns of an index of funds with similar investment objectives).

136

See supra

note 127 and accompanying text.

137

See

Investment Company Act Release No. 28298,

supra

note 28, 73 FR at 35442.

f. Management

We are adopting, as proposed, the requirement that the summary section include the name of each investment adviser and sub-adviser of the fund, followed by the name, title, and length of service of the fund's portfolio managers.

138

A fund will not be required to identify a sub-adviser whose sole responsibility is limited to day-to-day management of cash instruments unless the fund is a money market fund or other fund with a principal investment strategy of regularly holding cash instruments.

139

Also, a fund having three or more sub-advisers, each of which manages a portion of the fund's portfolio, will not be required to identify each sub-adviser, except that the fund will be required to identify any sub-adviser that is (or is reasonably expected to be) responsible for the management of a significant portion of the fund's net assets. For this purpose, a significant portion of a fund's net assets generally will be deemed to be 30% or more of the fund's net assets.

140

The portfolio managers required to be listed will be the same ones with respect to which information is currently required in the prospectus.

141

138

Item 5 of Form N-1A. Additional disclosures regarding investment advisers and portfolio managers that are currently required in the prospectus will continue to be required, but not in the summary section. Item 10(a) of Form N-1A.

139

Instruction 1 to Item 5(a) of Form N-1A. A fund will continue to be required to provide the name, address, and experience of all sub-advisers elsewhere in the prospectus. Item 10(a)(1)(i) of Form N-1A.

140

Instruction 2 to Item 5(a) of Form N-1A.

141

Item 10(a)(2) of Form N-1A.

Several commenters opposed requiring funds to disclose portfolio managers.

142

Two of these commenters argued that the identity and length of service of portfolio managers do not rise to the level of importance necessary to warrant inclusion in the summary.

143

However, the Commission continues to believe, along with other

commenters,

144

that investors in a fund should be provided basic information about the individuals who significantly affect the fund's investment operations.

142

See,

e.g.

, Capital Research Letter,

supra

note 34; ICI Letter,

supra

note 34; Vanguard Letter,

supra

note 42.

143

See

ICI Letter,

supra

note 34; Russell Letter,

supra

note 48.

144

See,

e.g.

, AARP Letter,

supra

note 34; Evergreen Letter,

supra

note 41; Financial Services Institute Letter,

supra

note 41.

See

also

Focus Group Transcripts,

supra

note 32, at 11;

id.

at 30-31 (importance of fund managers); ICI Survey,

supra

note 84, at 8 (61% of respondents believed that the name of the portfolio manager was very important or somewhat important).

Some commenters noted that funds are often managed by teams and that disclosing the individuals making up such teams would make the summary section too long and would not add substantive disclosure.

145

We note that, as is currently the case, disclosure will be required only with respect to the members of a management team who are jointly and primarily responsible for the day-to-day management of the fund's portfolio.

146

We agree with other commenters that investors have the same interest in the identity of the individuals who are primarily responsible for management, regardless of whether a fund is managed by an individual portfolio manager or a team.

147

145

See,

e.g.

, Capital Research Letter,

supra

note 34; Clarke Letter,

supra

note 35; Ogg Letter,

supra

note 75.

146

Instruction 2 to Item 5(b) of Form N-1A. In addition, if more than five persons are jointly and primarily responsible for the day-to-day management of a fund's portfolio, the fund need only provide the required information for the five persons with the most significant responsibility.

147

See

Evergreen Letter,

supra

note 41; Keil Letter,

supra

note 62.

g. Purchase and Sale of Fund Shares

We are adopting, with modifications to address exchange-traded funds,

148

the proposed requirement that the summary section disclose the fund's minimum initial or subsequent investment requirements and the fact that the fund's shares are redeemable, and identify the procedures for redeeming shares (

e.g.

, on any business day by written request, telephone, or wire transfer).

149

Commenters generally did not express a view with respect to this requirement.

150

148

See

discussion

infra

Part III.A.4. We are also making a technical amendment to current Item 6(b) of Form N-1A (which is being renumbered as Item 11(b)) to remove the requirement to disclose a fund's minimum initial or subsequent investment requirements because we have added this requirement to Item 6(a) of the summary section.

149

Item 6 of Form N-1A. We are modifying the proposal to permit funds that are used as investment options for retirement plans and variable insurance contracts to modify or omit this information.

See

supra

note 68 and accompanying text.

150

Three commenters supported the proposal.

See

Letter of Alison W. Beirlein (Feb. 26, 2008); Foreside Letter,

supra

note 74; Schnase Letter,

supra

note 35. Three commenters opposed the proposal.

See

Bent Letter,

supra

note 74; Clarke Letter,

supra

note 35; Letter of MFS Investment Management (Feb. 28, 2008) (“MFS Letter”).

h. Tax Information

We are adopting, as proposed, the requirements for tax information in the summary section. A fund will be required to state, as applicable, that it intends to make distributions that may be taxed as ordinary income or capital gains or that the fund intends to distribute tax-exempt income. A fund that holds itself out as investing in securities generating tax-exempt income will be required to provide, as applicable, a general statement to the effect that a portion of the fund's distributions may be subject to federal income tax.

151

Commenters generally expressed no views on these requirements.

152

151

Item 7 of Form N-1A.

152

One commenter opposed mandating the tax information.

See

Clarke Letter,

supra

note 35.

i. Financial Intermediary Compensation

The Commission is adopting the proposed requirement that the summary section of the prospectus conclude with disclosure regarding financial intermediary compensation. Commenters generally supported this requirement,

153

and we are modifying the requirement in two ways to address views expressed during investor focus groups and the concerns of commenters. Specifically, we are requiring the following statement, which could be modified provided that the modified statement contains comparable information:

154

153

See,

e.g.

, Data Communiqué Letter,

supra

note 35; Firehouse Letter,

supra

note 35; Fund Democracy

et al.

Letter,

supra

note 34; ICI Letter,

supra

note 34; Keil Letter,

supra

note 62; NAPFA Letter,

supra

note 44; Schnase Letter,

supra

note 35; SIFMA Letter,

supra

note 97; Letter of USAA Investment Management Company (Feb. 28, 2008) (“USAA Letter”); Vanguard Letter,

supra

note 42; Letter of Wachovia Securities, LLC (Aug. 29, 2008).

But see

Letter of Capital Research and Management Company (Aug. 29, 2008) (opposing the financial intermediary disclosure requirement).

154

Item 8 of Form N-1A.

Payments to Broker-Dealers and Other Financial Intermediaries

If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary's Web site for more information.

This disclosure will be new to fund prospectuses and is intended to identify the existence of compensation arrangements with selling broker-dealers or other financial intermediaries, alert investors to the potential conflicts of interest arising from these arrangements, and direct investors to their salesperson or the financial intermediary's Web site for further information. It is intended to address, in part, concerns that mutual fund investors lack adequate information about certain distribution-related costs that create conflicts for broker-dealers and their associated persons.

155

The Commission has recognized these concerns in a separate initiative in which the Commission proposed to require, among other things, disclosure of mutual fund distribution-related costs and conflicts of interest by selling broker-dealers and other financial intermediaries at the point of sale. Securities Act Release No. 8544 (Feb. 28, 2005) [70 FR 10521 (Mar. 4, 2005)]; Securities Act Release No. 8358 (Jan. 29, 2004) [69 FR 6438 (Feb. 10, 2004)]. One commenter to that proposal recommended use of a short-form “profile plus” disclosure document that would include, among other things, basic information about such potential conflicts of interest.

See

Letter of NASD (Mar. 31, 2005) available at

http://www.sec.gov/rules/proposed/s70604/nasd033005.pdf.

We intend to consider additional steps to enhance investor access to information prior to making an investment decision. See

infra

notes 200 and 201 and accompanying text.

We have added a provision permitting a fund to omit the financial intermediary disclosure if neither the fund nor any of its related companies pay financial intermediaries for the sale of fund shares or related services.

156

This addresses the concerns of a number of commenters who expressed the view that the Commission should not require the narrative disclosure from funds to which the disclosure does not apply.

157

According to one commenter, such funds include, for example, no-load funds and funds sold directly to investors.

158

156

Item 8 of Form N-1A.

157

See,

e.g.

, CAI Letter,

supra

note 67; ICI Letter,

supra

note 34; Oppenheimer Letter,

supra

note 44; T. Rowe Letter,

supra

note 49; USAA Letter,

supra

note 153; Vanguard Letter,

supra

note 42. We note that Item 8 permits a fund to modify the narrative statement provided that the modified statement contains comparable information. For example, a fund that is offered as an underlying investment option for a variable annuity contract could modify the narrative statement to reflect payments made to the sponsoring insurance company for distribution and other services.

158

See

ICI Letter,

supra

note 34. We note, however, that no-load funds and directly-sold funds will be required to include the narrative disclosure in certain circumstances. For example, the disclosure will be required if a no-load fund pays servicing fees to a fund supermarket.

We have also modified the proposed statement to clarify that payments to a broker-dealer or other financial intermediary may create a conflict of interest by influencing the broker-dealer or other intermediary to recommend a

fund over another investment. This modification, made in response to investor comments from our focus groups, is intended to increase awareness of potential conflicts of interest.

159

We are, therefore, revising the narrative to expressly notify investors that a conflict of interest may exist with respect to the broker-dealer's recommendation.

159

See

Focus Group Report,

supra

note 32, at 8 (stating that participants felt that new investors may not be aware of the potential conflict of interest); Focus Group Transcripts,

supra

note 32, at 16, 41.

We have determined not to add a requirement that the disclosure include standardized language enumerating the types of compensation that may be provided to financial intermediaries, as suggested by one commenter.

160

Rather, we are adopting a statement that will alert investors generally to the payment of compensation and the potential conflicts arising from that payment. An investor could then obtain further detail from his or her salesperson or the intermediary's Web site. As discussed further below, we intend to consider additional steps in the future that would further enhance investors' access to information about broker and intermediary compensation and conflicts of interest.

160

See

NAPFA Letter,

supra

note 44 (requesting standardized language describing possible forms of compensation, such as surrender fees, payment for shelf space, commissions paid for fund transactions, principal mark-ups and mark-downs, fees derived from bid-ask spreads, and payments for marketing support and/or education of registered representatives).

4. Exchange-Traded Funds

In March of this year, the Commission proposed several amendments to Form N-1A to accommodate the use of the form by ETFs.

161

Most ETFs are organized and registered as open-end funds. Unlike traditional mutual funds, however, they sell and redeem individual shares (“ETF shares”) only in large aggregations called “creation units” to certain financial institutions. ETFs register offerings and sales of ETF shares under the Securities Act and list their shares for trading under the Securities Exchange Act of 1934 (“Exchange Act”).

162

As with any listed security, investors trade ETF shares at market prices.

161

See

ETF Proposing Release,

supra

note 14, 73 FR at 14618.

162

For a description of how ETFs operate,

see id.

at 14620-21. ETFs currently operate pursuant to exemptive orders granted by the Commission. The final amendments define an ETF as a fund or class of a fund, the shares of which are traded on a national securities exchange, and that has formed and operates pursuant to an exemptive order granted by the Commission or in reliance on an exemptive rule adopted by the Commission. General Instruction A of Form N-1A. The final ETF definition in Form N-1A eliminates from the proposed definition the cross-reference to proposed rule 6c-11, which, if adopted, would codify many of the exemptive orders granted to ETFs.

See

ETF Proposing Release,

supra

note 14, 73 FR at 14621-30. We have made this technical change to the ETF definition because the Commission has not adopted proposed rule 6c-11.

The proposed amendments for ETF prospectuses were designed to meet the needs of investors (including retail investors) who purchase ETF shares in secondary market transactions rather than financial institutions that purchase creation units directly from the ETF. The proposed amendments for ETF prospectuses also addressed the need to modify the summary section of ETF prospectuses to include the amended ETF disclosures. Today, we are adopting the proposed amendments for ETF prospectuses with changes to respond to issues raised by commenters on the summary prospectus proposing release and the ETF proposing release.

163

The amendments we proposed in the ETF Proposing Release incorporated most of the comments from Barclays Global Fund Advisors (“BGFA”) in response to the Proposing Release.

See

Letter of BGFA (Feb. 28, 2008) (“BGFA Letter”). BGFA also requested guidance on how disclosure requirements in future exemptive orders will be integrated into the summary section of the prospectus. We are unable to provide guidance in this release because we do not know what additional disclosure requirements, if any, would be required for ETFs that form and operate pursuant to future exemptive orders. Additional disclosure requirements, if any, will be included in those exemptive orders.

a. Purchasing and Redeeming Shares

We are amending Form N-1A to eliminate the requirement that ETF prospectuses disclose information on how to buy and redeem shares directly from the ETF because it is not relevant to investors who are secondary market purchasers of ETF shares.

164

We proposed to require ETF prospectuses to state the number of shares contained in a creation unit (

i.e.

, the aggregate number of shares an ETF will issue or that is necessary to redeem from the ETF), that individual shares can only be bought and sold on the secondary market through a broker-dealer, and that shareholders may pay more than net asset value (“NAV”) when they buy ETF shares and receive less than NAV when they sell shares because shares are bought and sold at current market prices.

165

We also proposed to amend the fee table disclosure in Form N-1A to exclude fees and expenses for purchases or redemptions of creation units and instead to modify the narrative explanation preceding the example in the fee table to state that investors in ETF shares may pay brokerage commissions that are not reflected in the example.

166

Commenters who addressed the proposed amendments generally supported this approach.

167

We are adopting the amendments largely as proposed, with minor changes to conform to the final amendments to the summary section.

168

ETFs still will be required to include disclosure on how creation units are offered to the public in the SAI.

169

164

Item 6(c)(ii) of Form N-1A.

165

See

proposed Item 6(h)(3) and (4) of current Form N-1A; proposed Instruction 3 to Item 6(h) of current Form N-1A.

166

Proposed Instruction 1(e)(i) to current Item 3 of Form N-1A. One commenter to the ETF Proposing Release requested that we require ETFs to include spread costs in the fee table.

See

Letter of BGFA (May 16, 2008) (File No. S7-07-08) (“BGFA Letter on ETF Proposing Release”). This information is required to be disclosed pursuant to rule 11Ac1-5(b) of the Exchange Act [17 CFR 240.11Ac1-5(b)] and is publicly available to investors and the market, which considers the effect of spreads. We did not follow the commenter's suggestion because we believe that disclosure regarding additional spreads in an ETF prospectus, particularly in the summary section, would not be meaningful to most investors and may be confusing.

167

See,

e.g.

, BGFA Letter on ETF Proposing Release,

supra

note 166, Letter of Investment Company Institute (May 19, 2008) (File No. S7-07-08) (“ICI Letter on ETF Proposing Release”).

168

Item 6(c)(i) of Form N-1A; Instruction 1(e)(i) to Item 3 of Form N-1A. Item 6(c)(i)(B) requires disclosure that ETF shares may trade at a price greater than NAV (premium) or less than NAV (discount). The final amendments, like the proposed amendments, also will require each ETF to identify the exchange ticker symbol(s) and principal U.S. market(s) on which the shares are traded. Item 1(a)(2) of Form N-1A; rule 498(b)(1)(ii) 17 CFR 230.498(b)(1)(ii). We also are adopting a conforming amendment to the expense example in ETF annual and semi-annual reports. Instruction 1(e)(i) to Item 27(d) of Form N-1A.

169

Item 23(a) of Form N-1A. Consistent with our proposal, we are not amending this disclosure to include information on creation unit redemption, which Item 11 requires and which we are eliminating for ETFs.

See

Item 11(g) of Form N-1A.

Consistent with our proposal, the alternative disclosures in Items 3 and 6 of Form N-1A will not be available to ETFs with creation units of less than 25,000 shares.

170

Although only certain financial institutions purchase and redeem creation units directly from an ETF, individual or retail investors may be more likely to transact in creation units through one of these financial institutions if the creation unit size is less than 25,000 shares.

171

Because there is greater potential for retail

investors to transact (indirectly) in creation units as they decrease in size, we are requiring any ETF that sells and redeems its shares in creation units of 25,000 or less to include in its prospectus information on how to purchase and redeem creation units and the costs associated with those transactions.

172

170

Instruction (1)(e)(ii) to Item 3 of Form N-1A; Item 6(c)(ii) of Form N-1A. We also are adopting a conforming amendment to the expense example in ETF annual and semi-annual reports. Instruction 1(e)(ii) to Item 27(d) of Form N-1A.

171

ETFs directly sell and redeem creation units only to investors (“authorized participants”), usually brokerage houses, with which the ETF has a contractual agreement.

See, e.g.

, Investment Company Act Release No. 27963 (Aug. 31, 2007) [72 FR 51475 (Sept. 7, 2007)]. The authorized participant may act as a principal in the transaction or as agent for another, typically an institutional investor.

172

We have not, as one commenter to the ETF Proposing Release suggested, used a dollar value of a creation unit as the threshold for disclosure.

See

ICI Letter on ETF Proposing Release,

supra

note 167. We do not want to establish a threshold that may change (and as a consequence require amended disclosure) as a result of fluctuations in portfolio value rather than direct action by the ETF. We also disagree with one commenter who opined that the proposed threshold would create a de facto minimum of 25,000 shares for creation units and suggested that the threshold for exemptions from disclosure be set at 1,000 shares.

See

Letter of James J. Angel (May 16, 2008) (File No. S7-07-08). Other commenters, including ETF sponsors, explained they supported the proposed exemption from disclosure on the purchase and redemption of creation units because the information would confuse retail investors rather than because the disclosures were particularly costly or burdensome.

See

BGFA Letter on ETF Proposing Release,

supra

note 166; ICI Letter on ETF Proposing Release,

supra

note 167; Letter of Xshares Advisors LLC (May 20, 2008) (File No. S7-07-08) (“Xshares Letter”). Thus, it seems unlikely that an exemption from these disclosures would outweigh the other factors an ETF considers in determining the appropriate size of a creation unit, and we have not reduced the threshold for the exemption.

See

ICI Letter on ETF Proposing Release,

supra

note 167 (“[T]he appropriate size of a creation unit may vary depending on a number of factors, such as the type and availability of component securities, the expected uses of the product, and the likely Authorized Participants.”).

b. Total Return

At the suggestion of commenters, we are not adopting our proposal that ETFs include disclosure of market price returns in addition to returns based on NAV.

173

Like any other fund that files Form N-1A, an ETF must disclose returns based on NAV.

174

All commenters who addressed this proposal opposed it.

175

They disagreed that these returns would be more relevant to an investor's experience in the ETF than returns based on NAV because market price (which we proposed to define as closing price) is not tied to an investor's particular purchase price.

176

One commenter suggested that while NAV also does not represent any single investor's experience, it provides a better metric of performance than market price.

177

After consideration of these comments, we agree with these commenters that market price returns would not more closely represent the experience of any particular investor and may confuse investors, particularly when disclosed next to NAV returns.

178

We therefore are not requiring ETFs to disclose market price returns in Form N-1A.

179

173

See

ETF Proposing Release,

supra

note 14, 73 FR at 14623 n. 163 and preceding, accompanying, and following text.

174

See

Item 13(a) of Form N-1A.

175

See

ICI Letter on ETF Proposing Release,

supra

note 167; BGFA Letter on ETF Proposing Release,

supra

note 166; Xshares Letter,

supra

note 171.

176

See

ICI Letter on ETF Proposing Release,

supra

note 167; Xshares Letter,

supra

note 172.

177

ICI Letter on ETF Proposing Release,

supra

note 167 (“[NAV] provides a consistent metric calculated as of the same time each day in accordance with the fund's valuation policies and procedures, and is not subject to the influence of outlier bids or offers.”).

178

See id.

; BGFA Letter on ETF Proposing Release,

supra

note 166.

179

Similarly, we are not adopting our proposed conforming amendments to the total return information in ETF annual reports.

See

ETF Proposing Release,

supra

note 14, 73 FR at 14633 nn. 171-172 and accompanying text.

We also are not adopting our proposal that would have required an index-based ETF to compare its performance to its underlying index rather than a benchmark index.

180

Commenters on the ETF proposing release stated that we should not change the disclosure requirement for index-based ETFs without changing the requirement for all index funds.

181

We agree that the proposed change should be considered with respect to all index funds, not just index-based ETFs, and therefore, we are not adopting this amendment but may consider future rulemaking.

182

180

See

ETF Proposing Release,

supra

note 14, 73 FR 14633 at nn. 173-174.

181

See, e.g.

, ICI Letter on ETF Proposing Release,

supra

note 167; Xshares Letter,

supra

note 171.

182

We also are not, as one commenter suggested, eliminating the required disclosure concerning portfolio turnover information for index-based ETFs.

See

BGFA Letter,

supra

note 166. Although most ETFs may sell and redeem their creation units in kind (

i.e.

, for a basket of assets), they still engage in portfolio transactions in order to conform the portfolio to changes in the index. We believe that information regarding portfolio turnover also may be relevant to an investor who is comparing an investment in an index-based ETF to an investment in an open-end index fund.

c. Premium/Discount Information

We are adopting, as proposed, the amendments to the form to require each ETF to disclose to investors information about the extent and frequency with which market prices of fund shares have tracked the fund's NAV.

183

Each ETF will be required to disclose in its prospectus the number of trading days during the most recently completed calendar year and quarters since that year on which the market price of the ETF shares was greater than the fund's NAV and the number of days it was less than the fund's NAV (premium/discount information).

184

This disclosure is designed to alert investors to the relationship between NAV and the market price of the ETF's shares, and that investors may purchase or sell ETF shares at prices that do not correspond to NAV. In addition, this disclosure will provide historical information regarding the frequency of these deviations.

183

Item 11(g)(2) of Form N-1A.

See

ETF Proposing Release,

supra

note 14, 73 FR at 14632 nn. 166-169 and accompanying and following text. ETFs currently are required to disclose on their Internet Web sites the prior business day's last determined NAV, the market closing price of the fund's shares or the midpoint of the bid-ask spread at the time of the calculation of NAV (“bid-ask price”), and the premium/discount of that price to NAV.

See, e.g.

, WisdomTree Investments, Inc.

et al.

, Investment Company Act Release Nos. 27324 (May 18, 2006) [71 FR 29995 (May 24, 2006)] (notice) and 27391 (June 12, 2006) (order); PowerShares Exchange Traded Fund Trust

et al.

, Investment Company Act Release Nos. 25961 (Mar. 4, 2003) [68 FR 11598 (Mar. 11, 2003)] (notice) and 25985 (Mar. 28, 2003) (order).

184

Consistent with our proposal, the final amendments require ETFs to present premiums or discounts as a percentage of NAV. Instruction 2 to Item 11(g)(2) of Form N-1A.

See

ETF Proposing Release,

supra

note 14, 73 FR at 14632 nn. 166-169 and accompanying and following text. ETFs also will have to explain that shareholders may pay more than NAV when purchasing shares and receive less than NAV when selling, because shares are bought and sold at market prices. Instruction 3 to Item 11(g)(2) of Form N-1A. Consistent with the proposal, the final amendments require ETFs to include a table with premium/discount information in their annual reports for the five recently completed fiscal years. Item 27(b)(7)(iv) of Form N-1A. We are including instructions similar to those in Item 11 to assist funds in meeting this disclosure obligation. Instructions to Item 27(b)(7)(iv) of Form N-1A.

Commenters on the ETF proposing release were divided as to whether this specific premium/discount information would be useful to investors, although all who commented suggested the information need only be provided on the ETF's Web site.

185

Based on these comments, it appears that specific premium/discount information may not be generally useful to all ETF investors. For that reason, an ETF may omit the disclosure of specific premium/discount information in its prospectus or annual report if the fund provides the information on its Internet Web site and discloses in the prospectus or annual report an Internet address where

investors can locate the information.

186

Because ETFs may choose to provide this disclosure on their Web sites instead of in their prospectuses, we have added a requirement that the prospectus disclose that ETF shares may trade at a premium or discount.

187

This approach is designed to require disclosure of the information, but avoid duplicative disclosures that may result in additional regulatory burdens. Commenters who addressed the issue strongly supported permitting ETFs to include historical premium/discount information on their Web sites instead of in their prospectuses and annual reports.

188

Our amendments allow ETFs to choose the most cost-effective method of providing this disclosure to their investors.

185

See

Xshares Letter,

supra

note 172 (“[W]e believe that the disclosure of [premium/discount] information is useful to investors and support this requirement.”); Letter of NYSE Arca (May 28, 2008) (File No. S7-07-08) (asserting generally that disclosure of premium/discount information required on the Web site, together with other available index or portfolio information provides necessary information to investors to assess ETF pricing against the underlying index or portfolio).

But see

BGFA Letter on ETF Proposing Release,

supra

note 166 (“[T]he concept of premium/discount may not be an instructive way of thinking about ETF share prices in the secondary market * * * BGFA's Internet Web site experience suggests investors do not value this information highly.”); ICI Letter on ETF Proposing Release,

supra

note 167 (premium/discount information is not particularly useful and investors do not regularly seek it).

186

Item 11(g)(2) of Form N-1A; Item 27(b)(7)(iv) of Form N-1A. Although the time period required in the disclosure is different in the prospectus and annual report, ETFs will be able to omit both disclosures by providing on their Internet Web sites only the premium/discount information required by Item 11(g)(2) (the most recently completed fiscal year and quarters since that year).

. In order to rely on the exemptive orders that permit them to operate, ETFs also must disclose on their Web sites each day the premium and discount of the market closing price or the bid/ask price against the NAV as a percentage of NAV.

See supra

note 183. Investors in ETFs that choose not to disclose the required premium/discount information in their prospectuses or annual reports would be able to review historic and daily premium/discount information on the ETF's Web site.

187

Item 6(c)(i)(B) of Form N-1A.

188

See, e.g.

, BGFA Letter on ETF Proposing Release,

supra

note 166 (“Duplicative disclosure strikes us as unnecessary and burdensome * * *. Because data in a prospectus speaks of the prospectus date and therefore does not include the most recent information, we believe Internet Web site disclosure is preferable to prospectus disclosure. Accordingly, we believe that it would be sufficient to reference the availability of the information on the Internet Web site in a prospectus.”).

For purposes of calculating premium/discount information, we are adopting, with a modification, the proposed definition of “market price.”

189

Commenters objected to our proposed definition of market price as the closing price because of stale pricing concerns.

190

These commenters suggested that ETFs instead be permitted to use the mid-point between the highest bid and the lowest offer at the time the fund's NAV is calculated.

191

To address these concerns, the final amendments define the term “market price” to mean the closing price on the principal market on which ETF shares trade or within the range between the highest offer and the lowest bid if that price more accurately reflects the current market value of the fund's shares at the time the Fund calculates its NAV.

192

189

General Instruction A of Form N-1A.

See

ETF Proposing Release,

supra

note 14, 73 FR at 14632 nn. 164-165 and accompanying text for a discussion of the proposed definition of “market price.”

190

See, e.g.

, Letter of Chapman and Cutler LLP (May 19, 2008) (File No. S7-07-08) (“Chapman Letter”); ICI Letter on ETF Proposing Release,

supra

note 167 (noting that the closing price may be less accurate because the last trade occurred at a much earlier time than the NAV calculation).

191

See, e.g.

, Chapman Letter,

supra

note 190; ICI Letter on ETF Proposing Release,

supra

note 167.

See also

Fair Value Measurements, Statement of Financial Accounting Standards No. 157, § 24 (Fin. Accounting Standards Bd. 2006).

5. Conforming and Technical Amendments to Form N-1A

The foregoing amendments to Form N-1A require adding new items to the form and revising and renumbering certain existing items. We are adopting conforming amendments to Form N-1A, consistent with these revisions and renumbering, in order to update the table of contents and the various references to Form N-1A items contained within the form. We are also adopting technical amendments to Form N-1A to update the Commission's telephone number and address.

193

Cover page to Form N-1A; Item 1(b)(3) of Form N-1A.

B. New Delivery Option for Mutual Funds

1. Use of Summary Prospectus and Satisfaction of Statutory Prospectus Delivery Requirements

The Commission is adopting, with modifications to address commenters' concerns, the proposal to replace rule 498

194

with a new rule that permits the obligation under the Securities Act to deliver a statutory prospectus with respect to mutual fund securities to be satisfied by sending or giving a Summary Prospectus and providing the statutory prospectus online. In addition, the new rule will require a fund to send the statutory prospectus in paper or by e-mail upon request. The Summary Prospectus is required to contain the key information that is included in the new summary section of the statutory prospectus in the same order that is required in the statutory prospectus.

194

As adopted in 1998, rule 498 permits mutual funds to offer investors a disclosure document called a “profile,” which summarizes key information about the fund. An investor deciding to purchase fund shares based on the information in a profile is required to receive the fund's statutory prospectus with the security or confirmation of purchase. Investment Company Act Release No. 23065 (Mar. 13, 1998) [63 FR 13968 (Mar. 23, 1998)]. The amendments we are adopting today result in the elimination of the profile.

The new rule is intended to create a disclosure regime that is tailored to the unique needs of mutual fund investors in a manner that provides ready access to the information that investors need, want, and choose to review in connection with a mutual fund purchase decision. The rule provides for a layered approach to disclosure in which key information is sent or given to the investor and more detailed information is provided online and, upon request, is sent in paper or by e-mail. This is intended to provide investors with better ability to choose the amount and type of information to review, as well as the format in which to review it (online or paper). In addition, the provision of a Summary Prospectus containing key information about the fund, coupled with online provision of more detailed information, should aid investors in comparing funds.

195

In short, we believe that the new rule will result in funds providing investors with more useable information than they receive today in a format that investors are more likely to use and

understand. Under the new rule, an investor could choose to receive the statutory prospectus in the same paper format that would be provided under our prior rules.

195

A recent survey indicated that 90% of investors surveyed had access to the Internet.

See

Telephone Survey Report,

supra

note 32, at 115. It also indicated over half (56%) rely on the Internet to some extent (ranging from “a little” to “completely”) in making investment decisions.

. at 116. The survey report further indicated that 53% of respondents who own mutual funds accessed investment information via the Internet.

. at 6.

The new rule provides that any obligation under Section 5(b)(2) of the Securities Act

196

to have a statutory prospectus precede or accompany the carrying or delivery of a mutual fund security in an offering registered on Form N-1A is satisfied if (1) a Summary Prospectus is sent or given no later than the time of the carrying or delivery of the fund security;

197

(2) the Summary Prospectus is not bound together with any materials, except as described below; (3) the Summary Prospectus that is sent or given satisfies the rule's requirements at the time of the carrying or delivery of the fund security; and (4) the conditions set forth in the rule, which require a fund to provide the Summary Prospectus, statutory prospectus, and other information on the Internet in the manner specified in the rule, are satisfied.

198

As discussed in more detail below, we have changed the proposed condition that the Summary Prospectus be given “greater prominence” than accompanying materials into a requirement of the rule, rather than a condition to satisfaction of delivery obligations under section 5(b)(2) of the Securities Act. We have also clarified that any particular Summary Prospectus is not required to be given “greater prominence” than any other Summary Prospectuses or statutory prospectuses. As adopted, we are also permitting the Summary Prospectuses and statutory prospectuses of multiple underlying funds of a variable insurance contract to be bound with each other and with the statutory prospectus for the contract.

196

15 U.S.C. 77e(b)(2).

197

A fund could rely upon existing Commission guidance, which typically requires affirmative consent from individual investors, to send or give a Summary Prospectus by electronic means.

See

Securities Act Release No. 7233 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)]; Securities Act Release No. 7856 (Apr. 28, 2000) [65 FR 25843 (May 4, 2000)]. If, prior to the effective date of this rule, an investor had consented in accordance with existing Commission guidance to receive future versions of one or more funds' statutory prospectuses by electronic means, we would not object if a fund or financial intermediary relies on that consent to send or give the Summary Prospectuses of those funds by electronic means to that investor, provided that the consent is not otherwise revoked.

198

Rule 498(c).

Section 5(b)(2) of the Securities Act makes it unlawful to deliver a security for purposes of sale or for delivery after sale “unless accompanied or preceded” by a statutory prospectus. Under the rule, delivery of the statutory prospectus for purposes of section 5(b)(2) is accomplished by sending or giving a Summary Prospectus and by providing the statutory prospectus and other required information online. Failure to comply with the rule's requirements for sending or giving a Summary Prospectus and providing the statutory prospectus and other information online would mean that the rule could not be relied on to meet the section 5(b)(2) prospectus delivery obligation. Absent satisfaction of the section 5(b)(2) obligation by other available means,

199

a Section 5(b)(2) violation would result. The rule also requires a fund to send the statutory prospectus upon request. This requirement is not a condition to reliance on the rule, and failure to send the requested statutory prospectus will result in a violation of the rule (as opposed to a violation of section 5(b)(2)).

199

These include paper delivery of a statutory prospectus or electronic delivery of a statutory prospectus in reliance upon existing Commission guidance. See

supra

note 197 for existing Commission guidance on electronic delivery. We note that it would be permissible to satisfy Section 5(b)(2) obligations by relying on rule 498 to send or give a Summary Prospectus to some investors, while providing a statutory prospectus to others. For example, it would be permissible to rely on rule 498 to send or give the Summary Prospectus to existing investors who purchase additional shares while providing the statutory prospectus to new investors. It would also be permissible for a life insurance company to satisfy Section 5(b)(2) obligations with respect to a variable insurance contract by relying on rule 498 to send or give a Summary Prospectus with respect to some underlying funds, while providing a statutory prospectus with respect to other underlying funds, for example, where some underlying funds maintain a Summary Prospectus while others do not.

Section 5(b)(2) does not require delivery of the statutory prospectus prior to delivery of the security or confirmation of the transaction. As a result, mutual fund investors too often receive the statutory prospectus after the purchase transaction when the investment decision is complete. The rules we are adopting will, in practice, require any fund that is relying on the Summary Prospectus to meet its obligations under section 5(b)(2) to post both its Summary Prospectus and statutory prospectus on the Internet at all times. This will result in significantly enhanced access by investors to information about the fund prior to the time of making an investment decision. Several commenters observed that it would be helpful if investors could review a Summary Prospectus prior to making an investment decision.

200

We intend to consider additional steps in the future that would further enhance investors' access to the Summary Prospectus, other information about the fund, and enhanced information about broker and intermediary compensation and conflicts of interest before the investment decision. For example, we continue to consider appropriate disclosures at the point of sale by financial intermediaries, including whether there should be an obligation to direct investors to the online availability of the Summary Prospectus and offer investors a copy of the Summary Prospectus.

201

200

See, e.g.

, AARP Letter,

supra

note 34; Fund Democracy

et al.

Letter,

supra

note 34.

201

See supra

note 155. To the extent that we conclude that such an obligation on the part of financial intermediaries is appropriate, we would also consider similar obligations in the case of funds that are sold directly to investors.

The rule we are adopting also provides that a communication relating to an offering registered on Form N-1A that is sent or given after the effective date of a mutual fund's registration statement (other than a prospectus permitted or required under Section 10 of the Securities Act) shall not be deemed a prospectus under Section 2(a)(10) of the Securities Act if (1) it is proved that prior to or at the same time with the communication a Summary Prospectus was sent or given to the person to whom the communication was made; (2) the Summary Prospectus is not bound together with any materials, except as described below; (3) the Summary Prospectus that was sent or given satisfies the rule's requirements at the time of the communication; and (4) the conditions set forth in the rule, which require a fund to provide the Summary Prospectus, statutory prospectus, and other information on the Internet in the manner specified in the rule, are satisfied.

202

This provision is similar to section 2(a)(10)(a) of the Securities Act, which provides that a communication sent or given after the effective date of the registration statement (other than a prospectus permitted under subsection (b) of Section 10) shall not be deemed a prospectus if it is proved that prior to or at the same time with the communication a written prospectus meeting the requirements for a statutory prospectus at the time of the communication was sent or given to the person to whom the communication was made.

203

Pursuant to this provision, communications that would otherwise be considered “prospectuses” subject to the liability provisions of section 12(a)(2) of the Securities Act are not

deemed prospectuses and are not subject to section 12(a)(2) if they are preceded or accompanied by the statutory prospectus.

204

Similarly, under the new rule, communications that are preceded or accompanied by a Summary Prospectus are not deemed to be prospectuses and are not subject to section 12(a)(2) if all the conditions of the rule are met. These communications remain subject to the general antifraud provisions of the federal securities laws.

205

202

Rule 498(d). This provision is limited to a mutual fund Summary Prospectus that satisfies the terms of the proposed rule and does not apply in the case of any issuer other than a mutual fund.

203

15 U.S.C. 77b(a)(10)(a).

204

15 U.S.C. 77

(a)(2). Section 12(a)(2) of the Securities Act imposes liability for materially false or misleading statements in a prospectus or oral communication, subject to a reasonable care defense.

205

See, e.g.

, Section 17(a) of the Securities Act [15 U.S.C. 77q(a)]; Section 10(b) of the Exchange Act [15 U.S.C. 78j(b)]; Section 34(b) of the Investment Company Act [15 U.S.C. 80a-33(b)].

Commenters generally supported the proposal, noting that investors will be more likely to read and understand the Summary Prospectus than the statutory prospectus and that use of the Summary Prospectus will help investors to focus on what is most important in making investment decisions with respect to a particular fund.

206

One commenter noted that its own research has shown that most investors do not find the statutory prospectus to be a particularly useful document and do not rely heavily on it in making a fund selection. The commenter agreed that it makes little sense to continue to require delivery of a document to all investors that most say they do not value.

207

A second commenter noted that the proposal “reflects the strikingly broad consensus that investors would be best served by simplified, streamlined disclosure of essential fund information” and is supported by research conducted by the Commission and others.

208

Similarly, investors in our focus groups generally expressed favorable views of the Summary Prospectus, noting its usefulness as a screening tool to identify funds that they might wish to research further.

209

Commenters also approved of the proposal's use of the power of the Internet and advances in technology to deliver information to investors.

210

206

See, e.g.

, AARP Letter,

supra

note 34; CMFI Letter,

supra

note 44; Fund Democracy

et al.

Letter,

supra

note 34; ICI Letter,

supra

note 34; MFDF Letter,

supra

note 34.

207

See

Fund Democracy

et al.

Letter,

supra

note 34.

208

See

ICI Letter,

supra

note 34.

209

Focus Group Report,

supra

note 32, at 5-6 (quoting participants as stating, “I think it cuts to the important factors of performance, cost, objectives. I like it;” “It's a two-minute read. If I want more information, I can ask for it;” “I think that this [short-form prospectus] you'd read and if you're interested and then you've got questions and you want to go more in-depth and go to the long one;” “I think both [the long and short-form prospectuses] have their place. I think it would be foolish to give up the long-form for (the short[-]form) and I think it would be foolish not to have the short-form and insist on a long-form. They both have their place.”).

210

See, e.g.

, AARP Letter,

supra

note 34; CMFI Letter,

supra

note 44; ICI Letter,

supra

note 34; Oppenheimer Letter,

supra

note 44.

Two commenters argued that use of the Summary Prospectus should be mandatory, including one who noted that inconsistent use of the Summary Prospectus could create confusion and would make comparison of funds more difficult for investors.

211

We have determined not to mandate use of the Summary Prospectus at this time. We believe that further public comment on this important step is necessary, and we intend to review the use of the Summary Prospectus by investors in funds that voluntarily adopt the Summary Prospectus and reconsider whether the Summary Prospectus should be mandated in the future.

211

See

Letter of Kevin Possin and Ann Lavine (Feb. 7, 2008); Vanguard Letter,

supra

note 42.

As noted above, we are modifying the rule's conditions in three respects to address the concerns of commenters. First, we have eliminated the condition that the Summary Prospectus be given greater prominence than any accompanying materials

212

and instead made it a rule requirement.

213

Second, we have modified this requirement to clarify that a Summary Prospectus need not be given “greater prominence” than other Summary Prospectuses or statutory prospectuses that accompany the Summary Prospectus. Third, we have revised the condition that would have prohibited the Summary Prospectus from being bound together with any other materials

214

to permit a Summary Prospectus for a fund that is available as an investment option in a variable annuity or variable life insurance contract to be bound together with the statutory prospectus for the contract and Summary Prospectuses and statutory prospectuses for other investment options available under the contract.

215

212

Proposed rule 498(c)(1) and (d)(1).

213

Rule 498(f)(2).

214

Proposed rule 498(c)(1) and (d)(1).

215

Rule 498(c)(2) and (d)(2).

We have made the “greater prominence” standard a rule requirement instead of a condition to satisfaction of section 5(b)(2) obligations.

216

While we continue to believe that the “greater prominence” requirement is important to prevent the Summary Prospectus from being obscured by accompanying sales and other materials and to highlight for investors the concise, balanced presentation of the Summary Prospectus,

217

we are persuaded by commenters that the consequences of failure to meet the condition—a Section 5 violation—is not needed to achieve our goal.

218

Therefore, we are adopting commenters' suggestion that satisfaction of the “greater prominence” standard be a rule requirement.

219

As adopted, the “greater prominence” requirement is not a condition to reliance on the rule to satisfy a fund's or intermediary's delivery obligations under section 5(b)(2) of the Securities Act or the provision that a communication shall not be deemed a prospectus under section 2(a)(10) of the Securities Act. A person that complies with the conditions to the rule will not violate section 5(b)(2) if the “greater prominence” standard is not satisfied. This failure will, however, constitute a violation of the Commission's rules. Generally, we believe that the “greater prominence” requirement would be satisfied if the placement of the Summary Prospectus is more prominent than accompanying materials,

e.g.

, the Summary Prospectus is on top of a group of paper documents that are provided together.

220

216

Rule 498(f)(2).

217

See, e.g.

, Pace Letter,

supra

note 125 (expressing support for the “greater prominence” requirement).

218

See, e.g.

, ABA Letter,

supra

note 37; ICI Letter,

supra

note 34; NYC Bar Letter,

supra

note 75.

219

See, e.g.

, ABA Letter,

supra

note 37; ICI Letter,

supra

note 34; Oppenheimer Letter,

supra

note 44.

220

In response to a commenter's concerns, we are making a technical change to the “greater prominence” requirement to clarify that any particular Summary Prospectus need not be given “greater prominence” than any other Summary Prospectuses or statutory prospectuses that accompany the Summary Prospectus.

See

ICI Letter,

supra

note 34.

We are adopting the condition that prohibits a Summary Prospectus from being bound together with any other materials. Although commenters were split on the proposed binding prohibition, with some supporting the requirement and others opposed or seeking modifications,

221

we continue

to believe that it is important to prevent the Summary Prospectus from being obscured by accompanying sales and other materials and to highlight for investors the concise, balanced presentation of the Summary Prospectus. We are, however, persuaded that it is appropriate to permit binding the statutory prospectus of a variable insurance contract with the Summary Prospectuses and statutory prospectuses of its underlying funds.

222

This will permit satisfaction of prospectus delivery requirements for both a variable insurance contract and its underlying funds in one consolidated package and does not involve any risk of the prospectuses being obscured by sales or other materials. Specifically, under rule 498, a Summary Prospectus for a fund that is available as an investment option in a variable annuity or variable life insurance contract may be bound together with the statutory prospectus for the contract and Summary Prospectuses and statutory prospectuses for other investment options available in the contract, provided that: (i) All of the funds to which the Summary Prospectuses and statutory prospectuses that are bound together relate are available to the person to whom such documents are sent or given; and (ii) a table of contents identifying each Summary Prospectus and statutory prospectus that is bound together, and the page number on which it is found, is included at the beginning or immediately following a cover page of the bound materials. These conditions are intended to ensure that investors are not inundated with prospectuses that are not relevant to the contract they are considering and to ensure that investors can readily locate the particular prospectuses in which they are interested.

221

See, e.g.

, Pace Letter,

supra

note 125 (supporting binding prohibition); T. Rowe Letter,

supra

note 49 (supporting a binding prohibition instead of a “greater prominence” requirement); ICI Letter,

supra

note 34 (arguing that rule should prohibit Summary Prospectuses from being bound together with sales materials, or alternatively that there be certain specific carve-outs to permit binding of funds' privacy notices and to permit the binding together of Summary Prospectuses for certain similar types of funds); Letter of Charles Schwab & Co., Inc., and Charles Schwab Investment Management, Inc. (Feb. 28, 2008) (“Schwab Letter”) (requesting carve-out to permit binding of funds' privacy policies); Data Communiqué Letter,

supra

note 35 (opposing binding prohibition); Dechert Letter,

supra

note 50 (opposing binding prohibition); Schnase Letter,

supra

note 35 (opposing binding prohibition).

222

See, e.g.

, CAI Letter,

supra

note 67; Dechert Letter,

supra

note 50; EQ/AXA Letter,

supra

note 67; Fidelity Letter,

supra

note 86; ICI Letter,

supra

note 34; Vanguard Letter,

supra

note 42.

2. Content of Summary Prospectus

Rule 498 sets forth the content requirements that a Summary Prospectus must satisfy.

223

A Summary Prospectus meeting the requirements of the rule will be deemed to be a prospectus that is authorized under section 10(b) of the Securities Act and section 24(g) of the Investment Company Act for the purposes of section 5(b)(1) of the Securities Act.

224

A Summary Prospectus meeting these content requirements could be used to offer securities of the fund pursuant to section 5(b)(1) even if the other conditions of the rule were not satisfied. The failure to satisfy these other conditions will, however, preclude the use of the Summary Prospectus for the other purposes described in rule 498, including for purposes of satisfying, in part, a fund's obligation under section 5(b)(2) to deliver a statutory prospectus. In these circumstances, the section 5(b)(2) obligation to deliver a fund's statutory prospectus will have to be met by means other than the new rule or a section 5(b)(2) violation will result.

223

Rule 498(b). Rule 498(a) defines terms used in the rule.

224

Rule 498(b). Section 10(b) of the Securities Act [15 U.S.C. 77j(b)] authorizes the Commission to adopt rules permitting the use of a prospectus for the purposes of Section 5(b)(1) [15 U.S.C. 77e(b)(1)] that summarizes information contained in the statutory prospectus. Section 24(g) of the Investment Company Act [15 U.S.C. 80a-24(g)] authorizes the Commission to permit the use of a prospectus under Section 10(b) of the Securities Act to include information the substance of which is not included in the statutory prospectus.

a. General

We are adopting, with one clarification, the requirement that the Summary Prospectus include the same information as required in the summary section of the statutory prospectus in the same order required in the statutory prospectus.

225

This key information about investment objectives, costs, and risks forms the body of the Summary Prospectus.

225

Rule 498(b)(2) (Summary Prospectus to include information required or permitted by Items 2 through 8 of Form N-1A). We are adopting, as proposed, the provision that permits a fund to omit from the Summary Prospectus an explanation of the reasons for any change in the securities market index used for comparison purposes in the performance presentation. Rule 498(b)(2).

Cf.

Instruction 2(c) to Item 4(b)(2) of Form N-1A (requiring this explanation in summary section of statutory prospectus).

We are adopting a new requirement to clarify that if a fund relies on rule 498 to meet its statutory prospectus delivery obligations, the information contained in the Summary Prospectus must be the same as the information contained in the summary section of the fund's statutory prospectus, except as expressly permitted by rule 498.

226

That is, a fund may not provide different, such as more or less expansive, information in its Summary Prospectus than it provides in its statutory prospectus. If, pursuant to rule 497, a mutual fund files a “sticker” to its statutory prospectus that changes any information in the summary section, the Summary Prospectus should either be “stickered” or amended to reflect the information in the statutory prospectus “sticker.” This new requirement is intended to clarify our intent in adopting the same content requirements for the Summary Prospectus and the summary section of the statutory prospectus.

226

Rule 498(f)(4). Rule 498(b)(2) expressly permits a Summary Prospectus to omit certain information relating to a change in the securities market index used for comparison purposes.

See supra

note 225.

The Summary Prospectus will not be permitted to omit any of the required information or to include additional information except as described below. A document that omits information required in a Summary Prospectus or includes additional information not permitted by the rule will not be a Summary Prospectus under the rule and may not be used under the rule for any purpose, including meeting the obligation to deliver a fund's statutory prospectus.

227

We are adopting these requirements, as proposed, because we believe that uniformity of content in Summary Prospectuses will provide better comparability, which will help investors to make a more informed investment decision, a conclusion which was supported by a number of commenters.

228

While some commenters argued that the rule should provide funds with flexibility to customize the content of the Summary Prospectus,

229

we are not persuaded because customization would significantly impair investors' ability to compare information across funds. We note that, provided the content and order requirements of the rule are met, funds have almost complete flexibility with respect to design issues, including layout, graphics, and color.

230

227

A Summary Prospectus that omits certain information required by the rule or includes additional information not permitted by the rule could be deemed to be a prospectus under Section 10(b) of the Securities Act for purposes of Section 5(b)(1) of the Securities Act pursuant to rule 482 under the Securities Act [17 CFR 230.482] if the conditions of that rule are met.

228

See, e.g.

, Letter of Brown & Associates LLC and Self Audit, Inc. (Feb. 27, 2008) (“Self Audit Letter”); CMFI Letter,

supra

note 44; Data Communiqué Letter,

supra

note 35; Evergreen Letter,

supra

note 41; Firehouse Letter,

supra

note 35; Great-West Letter,

supra

note 42; ICI Letter,

supra

note 34; Keil Letter,

supra

note 62; Letter of NewRiver, Inc. (Feb. 28, 2008) (“NewRiver Letter”); Oppenheimer Letter,

supra

note 44; Pace Letter,

supra

note 125; Schnase Letter,

supra

note 35.

229

See, e.g.

, Clarke Letter,

supra

note 35; Hastie Letter,

supra

note 59; Letter of Stephen A. Keen (Feb. 28, 2008); Ogg Letter,

supra

note 75.

230

See, e.g.

, AARP Letter,

supra

note 34 (Commission “should set broad parameters for compliance with the required substance, format and presentation of the summary prospectus, but also allow funds to use their creativity in designing a form that is truly investor friendly.”); Data Communiqué Letter,

supra

note 35 (favoring si

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