You have probably heard it a thousand times: Never invest in a mutual fund without reading the prospectus.
That's good advice, most people would say.
But if the mutual fund industry has its way, investors soon will be sending in their money without ever getting a prospectus.
Industry officials say investors should be allowed to buy mutual fund shares based on advertisements alone, provided the ads contain certain information. Therefore, the industry has asked the Securities and Exchange Commission to approve these "off-the-page" sales.
The law now says that mutual fund shares generally cannot be sold unless the investor has received a prospectus.
The proposed change is tucked into a larger package that would modernize the Investment Company Act of 1940, which the SEC TC is reviewing. The act is the regulatory foundation of the mutual fund industry.
"I'm not sure what the SEC is going to do with that proposal," said Betty Hart, spokeswoman for the Investment Company Institute, a mutual fund trade association in Washington. "We think this would be helpful to people."
Britain and several other nations allow mutual fund sales without prospectuses, Ms. Hart said. Also, even in the United States, no prospectus is required when stocks or bonds are sold through brokerage firms. By giving mutual funds the same treatment, the law would even the playing field, industry officials say.