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U.S. Securities and Exchange Commission

Speech by SEC Chairman:
Opening Statement at Open Meeting on Requiring Mutual Funds to Provide Investor Information Using Interactive Data


Chairman Christopher Cox

U.S. Securities and Exchange Commission

Washington, D.C.
May 21, 2008

Good morning. This is an open meeting of the U.S. Securities and Exchange Commission under the Government in the Sunshine Act.

This morning we are considering a recommendation from the Division of Investment Management to propose to require that mutual funds make their risk/return summary information available to investors in interactive data format.

Just one week ago, we proposed a rule that will require public companies to make their financial statement information available in interactive data format. In the near future, this will mean that mutual fund managers will have a powerful new tool to help them pick and choose among the thousands of public companies in which a mutual fund might invest. And that will indirectly be a great benefit to investors in mutual funds.

What we are considering today will be a direct benefit to mutual fund investors because providing the risk/return summary information for every mutual fund in interactive data format will allow investors to do their comparison-shopping in ways that were never before possible.

For the SEC, which is the investor's advocate, mutual funds are a special area of interest — because for years they have been the investment of choice for ordinary investors. In fact, they have exploded in popularity in recent decades. From $450 million in assets in 1940 and $38 billion in 1966, mutual funds have grown to nearly $12 trillion in assets today. Eighty-eight million individual investors in the United States now own mutual funds. And these same individual investors hold 86% of total mutual fund assets.

Today there are over 8,000 mutual funds for investors to choose from. That's a great thing — but how does an individual investor know where to start? How can anyone take advantage of all of this choice, and be a discriminating purchaser who focuses on the fund that's exactly right for them?

We know, of course, from a variety of investor surveys what kinds of information are most important to investors. They're especially concerned with a fund's performance, its risks, and its fees and expenses. The good news is that this is the very information that is highlighted in the risk/return summary section of a mutual fund prospectus. The bad news is that, as easy as it might be to find that information for a particular mutual fund, it is exceptionally difficult for investors to compare information about a dozen funds, not to mention 8,000. As a result, investors have had to rely on the recommendations of investment professionals — and in many cases, those people have had a financial incentive to favor particular funds over all the others.

Today's proposal is designed to put enormously powerful comparative tools at the fingertips of every investor, and of every investment professional who is honestly dedicated to helping mutual fund customers and recommending what is in the investor's best interests.

The opportunity to put this important comparative information for mutual funds into interactive data format was really created last June, when the Commission approved rule amendments to enable mutual funds voluntarily to submit risk/return summary information to the SEC using interactive data. Since last August, some 20 mutual funds have already done this, even though it wasn't required.

And earlier this spring, the Commission launched a new Web page that lets investors analyze and compare the information provided by these mutual funds. The interactive data viewer on this Website has demonstrated how investors will be able to compare funds across a broad spectrum.

The rules we are considering today would multiply the power of that comparative shopping tool by several orders of magnitude. Instead of comparing fund information for 20 funds, an investor could compare literally thousands of them. And not only could investors use the information on websites such as the one the SEC has previewed, but they could download the information directly into spreadsheets, and analyze it in any way they want, using commercial off-the-shelf software. This would be an enormous help to millions of ordinary investors who put their savings in mutual funds.

So I would like to thank everyone who has helped along the way to bring this proposal before the Commission today. That includes the Investment Company Institute, which two years ago undertook to develop the data tags for mutual fund risk/return summaries that will let investors see this information in interactive data format. Last year, they completed that work, including soliciting public comment and incorporating the public comment into the way the tags were designed. Then, later in 2007, the ICI's list of tags was acknowledged by XBRL International, the international organization responsible for developing interactive data standards world-wide.

The heavy lifting on today's proposal was led by the Director of the Division of Investment Management, Buddy Donohue, and by the leaders on his team, including particularly Susan Nash, Tara Buckley, and Alberto Zapata. Every one of you worked long and hard to prepare this release for our consideration today, and the entire Commission is deeply grateful for that.

I'd also like to thank several others on the staff who helped in this effort, in particular, the Division of Corporation Finance, the Office of the General Counsel, the Office of Interactive Disclosure, the Office of Information Technology, and the Office of Economic Analysis. You have developed an outstanding proposal that will in future years provide enormous benefits to individual investors, and for that we thank you very much.

And now, to provide further details on the proposal, I'll turn it over to the Director of the Division of Investment Management, Buddy Donohue.


Modified: 05/21/2008