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News April 11, 2005 Issue

NASD Task Force Urges ‘Profile Plus’

The SEC should mandate the use of a new web-based "Profile Plus" prospectus as a point of sale disclosure document.

So said the NASDís Mutual Fund Task Forceís recent report on Mutual Fund Distribution. The liability concerns surrounding the SECís original profile prospectus would be alleviated by mandating the Profile Plus, specifying the required line items, and requiring a hyperlink to the underlying prospectus, said the group. It urged the SEC to embrace the access-equals-delivery standard for electronic delivery, noting that hard copies of the Profile Plus could be provided to investors that request them. Many of the task force members said they conditioned their support of the Profile Plus on the SECís acceptance of web-based delivery.

The report also addressed Rule 12b-1 issues. Among other things, the task force recommended that 12b-1 fees not be deducted at the shareholder account level. It said that a closed-end fund may appropriately charge 12b-1 fees "if the fees are charged for shareholder servicing or ongoing advice to existing fund shareholders," and suggested that additional regulatory guidance in that area would be helpful.