IF THERE'S TRUTH IN SAVINGS, WHY NOT TRUTH IN MUTUAL FUNDS?
WASHINGTON, June 21 /PRNewswire/ -- On the day that the Truth in Savings Act takes effect, the Independent Bankers Association of America (IBAA) pointed to the irony of a proposed regulation that would curtail disclosure requirements for certain mutual funds. In a comment letter to the Securities and Exchange Commission (SEC), IBAA President James R. Lauffer opposed a proposal that would permit "off-the-page prospectuses" for mutual funds to include an order form if specified disclosures are made. The proposal would allow mutual funds to be sold through direct mail and print advertisements before the investor is provided with a complete prospectus. The proposal clashes with Congress' concern about consumers having sufficient information to make prudent investment decisions, Lauffer said. Congress' regard for consumer protection was most recently manifested in the Truth in Savings Act of 1991, effective today, which requires full disclosure about insured deposit accounts. "Consumers investing in uninsured mutual funds put at risk both their interest and principal," said Lauffer, chairman, president and CEO of First National Bank of Herminie, Irwin, Pa. "It is ludicrous that a consumer would be entitled to full and complete disclosure prior to opening a no-risk savings account, but not prior to investing in a much higher-risk mutual fund." The SEC's paramount concern should be investor protection, Lauffer said. But the proposal, intended to remedy perceived inequities between direct-marketed and broker-sold mutual funds, comes at customers' expense. Parity can be better achieved by requiring both types of mutual funds to provide a complete prospectus before the investment decision is made. At a time when many less-sophisticated consumers are investing in mutual funds, the SEC should ensure that they understand their investment choice and its consequences, Lauffer said. The SEC could better direct its resources toward developing "consumer-friendly" prospectuses that are meaningful and understandable. The proposal also exacerbates the problem of funds shifting from community banks to mutual funds, Lauffer said, undercutting community banks' ability to make small-business loans. "Mutual funds and money market funds do not invest in small communities, nor do they make small business loans," Lauffer said. "As the most prolific creator of jobs in the national economy, the availability of credit for small business is critical to our economic health." IBAA is the only national trade association that exclusively represents the interests of the nation's community banks. -0- 6/21/93 /CONTACT: Karen Thomas of the Independent Bankers Association of America, 202-659-8111/
CO: Independent Bankers Association of the America ST: District of Columbia IN: FIN SU: LEG
MH-DC -- DC012 -- 4087 06/21/93 13:42 EDT
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|Date:||Jun 21, 1993|
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