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Tuesday, March 21, 2006

ICI Will Improve Disclosure Through Technology

Reported by Marie Glancy

Investors need to receive more information more easily, and the Internet is the best way of making sure they do, the president of the Investment Company Institute said Monday.

In his keynote speech at the Mutual Funds and Investment Management Conference in Phoenix, Paul Schott Stevens highlighted the ways in which his organization has, over the past year, worked to help members meet compliance guidelines. Describing the Internet as "a world of information at our disposal," he stressed the need to make use of "its enormous potential to provide a breakthrough in communicating effectively with fund shareholders."

"The question is," he said, "how can we take the fullest advantage of it to improve the accessibility, utility, and quality of the information we provide?"

He pointed out that mutual fund companies find themselves in a sort of bind: stringent disclosure requirements mean shareholders must be presented with a lot of confusing, difficult-to-digest information. The less readable and accessible reports are, the less likely shareholders are to bother reading them at all -- and so, paradoxically, disclosure requirements could see mutual fund investors becoming less informed over time.

The ICI's proposed answer to this dilemma, Stevens revealed, lies in the field of interactive communications. He said plans are afoot to adapt the interactive data technology now used by the SEC -- known as eXtensible Business Reporting Language (XBRL) -- to enhance ICI's data dissemination capabilities. Ultimately, this move is intended to smooth the way for improved mutual fund disclosure.

ICI spokesperson Chris Wloszczyna told the MFWire that the XBRL initiative is in its very early stages. "XBRL is a data-tagging technology that focuses primarily on financial data," he explained. Investors seeking information on mutual funds are not looking for the financial statements and related information that the existing format of XBRL is designed to provide.

ICI will work with the SEC, consultants, technology experts, and "interested groups" to work out how relevant capabilities will be adapted to deliver information relevant to mutual fund investors, but as for what the final product will look like, "I don't think we have an answer just yet," Wloszczyna said.

Through the new technology, Stevens said, investors control exactly much information they receive, and the format in which they receive it. "XBRL represents an important step" towards optimum utilization of the Internet, he said. "But it must be part of a broader road map that will take us from paper-based disclosure to new and improved approaches."

With easier access to important data, Americans will be in a better position to make the right decisions about their money and financial planning, Stevens averred in his remarks. "More Americans than ever are attentive to their financial goals," he said. "They want to invest, they want to invest smart, and they want to start early."

As Congress prepares to vote on pension reform, Stevens called on legislators to help workers ensure a comfortable retirement. Specifically, he focused on the need to empower more workers through 401(k)s, voicing support for automatic enrollment in 401(k)s, a permanent extension on increased contribution limits, and widespread access to professional advice.  

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