NASD Notice to Members 03-77 - December 2003

Disclosure of Mutual Fund Expense Ratios in Performance Advertising; NASD Requests Comment on Proposed Amendments to Rules 2210 (Communications With the Public) and 2211 (Institutional Sales Material); Comment Period Expires January 23, 2004

Executive Summary

NASD proposes to amend Rules 2210 and 2211 to require all member communications with the public that contain investment company performance information (“performance advertising”) to present specified information about the fund’s expenses and performance in a prominent text box. These new requirements would improve investor awareness of the costs of buying and owning a mutual fund, facilitate comparisons among funds, and make presentation of standardized performance more prominent. NASD’s proposal would require that:

• All performance advertising contain a text box that sets forth the fund’s (a) standardized performance information; (b) maximum sales charge; and (c) annual expense ratio; and
• The text box information be presented in type size at least as large as non-standardized performance, if non-standardized performance information is included.

Questions concerning this Notice may be directed to Angela C. Goelzer, Counsel, Investment Company Regulation, Regulatory Policy and Oversight, at (202) 728-8120.

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