Toward easier-to-read fund prospectuses

Brace yourself: The typical mutual fund prospectus is getting much easier to read. For years, prospective investors have approached the generally wordy and legalistic disclosure documents with roughly the same enthusiasm as high school students assigned to read ''Silas Marner.''

Government regulations, which have required that nearly every detail of possible interest to anyone be presented to all investors, have made reading prospectuses tough going.

That has all begun to change.

After years of prodding by the mutual fund industry, the Securities and Exchange Commission recently concluded that ''mutual fund prospectuses are not effective disclosure documents for most investors because they are too long and complex.'' As a result, the SEC has approved the immediate use of shortened and readable prospectuses by new funds. Existing funds will be able to phase in the shortened prospectuses over the next several months. The new prospectus will still require the inclusion of data necessary for a prospective purchaser to make an informed investment decision.

''Through this simplification ordinary investors will become more aware of the services and rates of return achieved by mutual funds over the years as well as the variety of investment choices open to them,'' said David Silver, president of the Investment Company Institute, the national association of mutual funds. ''The industry will save money in printing and delivery costs, investors will be better informed, and the SEC will save time in reviewing these documents - everyone is a winner,'' Mr. Silver concluded.

Prospectuses, which must be sent to all mutual fund investors when they make their investments, must continue to provide all information deemed to be ''necessary or appropriate in the public interest or for the protection of investors,'' the SEC said. Normally, this includes information on investment goals, fees, what the funds invest in, and financial information, among other things.

Under the new rules funds can cover complex items - not necessary to make an investment judgment about a particular fund - in a ''Statement of Additional Information,'' which they must make available on request, at no charge. This document will include so-called ''regulatory'' disclosures setting forth certain policies all mutual funds are required to adopt in order to comply with the law.

The simplified prospectuses will not normally exceed 12 pages.