The Americans for Financial Reform Education Fund (AFREF) appreciates the opportunity to comment on the above referenced proposed rule (“the Proposal”) by the Securities and Exchange Commission (the “SEC” of the “Commission”) concerning the simplification and streamlining of the most useful information and fees to investors. Members of the AFR Education Fund coalition include consumer, civil rights, investor, retiree, community, labor, faith based, and business groups.1
The Commission’s proposal to simplify the presentation of fees and expenses to improve the ability of investors to understand these critical disclosures, as well as its proposal to improve the quality of disclosures on open-ended funds, are both clearly a step in the right direction. However, we recommend that the Commission perform investor testing on these new disclosures to ensure that they are in fact the most effective way to make fund risks, returns, and expenses clear to investors. Such additional study is also necessary to make critical decisions about electronic vs paper delivery.
We also suggest that the Commission re-consider its approach in exempting funds with less than 10% of total assets invested in additional fee investment vehicles from inclusion in the acquired fund fees and expenses (AFFE) table, especially as it pertains to business development companies (BDCs) who continue to present issues related to corporate governance and whose investment advisers often have a conflict-of-interest with the BDC’s shareholders.