February 27, 2008
This excellent proposal will go a long way to making essential mutual fund information more accessible and easier to understand for average investors. The content of the prescribed summary hits all of the key elements, while the language used is plainer and clearer than anything that investors have had before.
However, since the proposed delivery scheme for mutual fund documents will rely heavily on the Internet, it is imperative that the rules be explicit about what the SEC expects in terms of usability and accessibility of the online documents.
The proposal already includes some excellent ideas, such as providing links from summary information to more detailed information. The requirement for a version that investors can retain on their computers is a good one. This "retainable" document will probably be in PDF or a common office format like Word, and there is no reason why it should not contain internal and external links. However, it would be helpful, too, if there was a requirement for companies to provide linked external information at "permalinks" or URLs that will remain accessible for a minimum period, preferably 10 years. Broken links are a major problem on the Web generally, due mostly to sloppy website management.
My main concern, however, is with the current wording "convenient for both reading online and printing on paper." The word "convenient" is too broad and subjective to be meaningful. A convenient format for one investor may not be convenient for another. For example, millions of Americans of all ages have some form of disability that affects their ability to use online information. A low-sighted individual may not have practical access to a summary prospectus if that document is presented online in a way that overrides the browser software's ability to increase the text size. An elderly investor who has difficulty using a mouse may find it hard to access the information if they are forced to use complex menus that require precise skills with a mouse.
In fact, there are so many permutations of what could make an online document "inconvenient" that it would be an enormously complicated task for the SEC to write rules that ensure that mutual fund information is provided online in formats that are convenient for all Americans. Fortunately, that work has already been done over the course of many years and with widespread consultation by experts in the fields of web usability and accessibility. These standards are embodied in the Web Content Accessibility Guidelines (WCAG) of the World Wide Web Consortium (W3C), the global standard setting body for the Internet. Similar guidelines are required of all Federal agencies under Section 508 of the Rehabilitation Act.
While these guidelines are designed to ensure accessibility to people with disabilities of all kinds, they have the benefit of improving access and usability for all web users, regardless of technology platform, age or experience. The millions of Americans who invest in mutual funds would be well served by the proposed rule if the SEC referred to the WCAG as the standards mutual fund companies are expected to meet for their online documents. Doing so would save the SEC the time and cost of having to formulate and constantly revise its own standards for accessibility and usability as new technologies become available.
Finally, it would be highly beneficial to the entire industry and investors if the summaries where electronically tagged before being filed with the SEC. Doing so would reduce updating costs for mutual fund companies, make it easier for investors to compare mutual funds on various data points, and give investors accessing mutual fund information on investment portals access to more accurate and timely information almost immediately it is filed on EDGAR. Given that the proposed summary follows a prescribed format and defined content, it should be easy to create a set of industry standard data tags for the information in the document.
Using the Internet properly is neither easy nor free, but it is enormously more economical and efficient than the expensive and wasteful paper-based system. While some will complain about the costs of providing accessible documents or interactive data, the fact is they will be saving a lot of money by moving away from print. It surely is not too much to ask that they reinvest a small portion of those print savings back into their web documents to ensure we don't replace an ineffective offline system with an ineffective online one.
Thank you for the opportunity to comment on this forward-thinking proposal.