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January 27, 2021

SEC Proposal Would Improve Transparency, Empower Investors

Earlier this month, Better Markets filed a comment letter on an SEC proposal that would change the disclosures that mutual funds and exchange-traded funds are required to send to their investors.
Why it matters. Investor disclosures are often technical, extremely long and poorly timed. Too often these important documents are unreadable and end up gathering dust on investors’ shelves.
What we said. The proposal would improve disclosures by requiring mutual and exchange-traded funds to promptly notify investors of important material changes. The suggested changes in the proposal would also improve readability by highlighting key information, such as the fund’s expenses, performance and holdings.
Bottomline. We support this effort—with some reservations. We are disappointed that the SEC has decided not to conduct robust testing to ensure that retail investors will be able to make sense of the new disclosures. Before finalizing the rule, the SEC should work to ensure that it is doing everything in its power to aid and inform investors, especially the most vulnerable. That requires investor testing, which the new leadership of the SEC should incorporate into many of its activities.
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