SEC chairman proposes more disclosure of risks


WASHINGTON -- In a reversal, the chairman of the Securities and Exchange Commission proposed yesterday that mutual fund prospectuses include a single-page summary of the risks and expenses that investors face.

In a separate action, the commission approved new disclosure rules for the annual proxy statements that mutual funds issue to investors.

Consumer advocates were pleased by both moves, particularly by the proposal of Arthur Levitt Jr., the commission chairman, that potential investors be given a clearly worded summary of a fund's risks, fees and investment goals.

"People don't read prospectuses," said Barbara L. N. Roper, an investment specialist with the Consumer Federation of America.

Fund industry lobbyists accepted the new proxy rules but were unenthusiastic about the one-page supplement because the commission had proposed in 1992 that a one-page summary be used in place of -- not in addition to -- a prospectus in soliciting some customers.

The new proxy rules, which will take effect in January, require mutual funds to disclose more information about directors' compensation and about the cost to investors if management fees are raised.

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