Funds' prpspectuses to be reviewed

MUTUAL FUNDS

December 26, 1993|By WERNER RENBERG | WERNER RENBERG,1993 By WERNER RENBERG

"I don't just want connoisseurs to understand a mutual fund's prospectus," says Barry Barbash. "I want my mother to understand it."

Barbash isn't merely a devoted son. He is the new director of the U.S. Securities and Exchange Commission's Division of Investment Management, which oversees more than 4,400 mutual funds (plus other investment companies and 18,000 investment advisers).

And he has considerable power to influence fund management companies to improve the clarity of prospectuses, which are supposed to tell you about a fund's investment policies and inherent risks.

"Toning up" the fund industry's disclosure and sales practices is his major goal. "Consumer protection -- that's the overriding theme," he said.

Barbash fears that many people buy funds they don't understand, partly because they don't understand the prospectuses that they should read before investing.

Barbash has hired a consulting firm to study who uses prospectuses and how they are used.

Interviews with focus groups of fund investors are scheduled to start in January.

As for sales practices, he wants to assess whether the fund industry is "accurately marketing what they are selling."

He notes that the SEC has received few letters from investors complaining about sales practices, but wonders whether that's because the markets have been going up.

It'll be some time before Barbash knows the conclusions of these studies and before they lead to proposals for changes.

But he's sure of one thing now: "Everything we do will be done in a balanced way. I don't want to hamstring the industry."

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