The number and types of funds have proliferated, as has the use of increasingly complex and sometimes risky instruments, including derivatives. That's why we're working to ensure that mutual fund prospectuses are not only comprehensive, but comprehensible. We'll soon be sitting down with the industry to determine how the Profiles have been working. We're exploring ways to provide investors with better tools for understanding a fund's risk level. This, too, is a question of communication.
Funds typically describe risk with highly technical definitions of inverse floaters and derivatives.
This may be useful in curing insomnia, but doesn't improve understanding of the fund's overall risk level. We can and must do better. This Commission believes in direct contact with investors. We've decided that the Federal Register is not the best way to communicate with the American people. Last year, for the first time in history, we called on investors themselves to suggest ways to better convey risks in fund prospectuses.