A stable, well-functioning financial market for allA stable, well-functioning financial market for allInformation disclosure by mutual fund companies
The information provided by mutual fund companies to their customers in accordance with legislation forms the basis of consumer protection in the mutual fund area.
The first reason for this is that a customer considering investing in a fund shall be provided with a solid basis for decision-making and a good understanding of what their money is being invested in and the terms and conditions of their investment. The second reason is that the customer is able to continuously evaluate his or her investments and compare the mutual fund company's offering with the customer's own expectations. The information should also facilitate accurate comparisons with other funds and products on the savings market.
The purpose of this investigation was to examine the extent to which Swedish mutual fund companies comply with the laws and regulations in the area of providing information to customers. Finansinspektionen (FI) can state that the predominant view is not entirely unambiguous. There is a satisfactory level of compliance with many of the information requirements imposed by law. However, improvements can be made in certain areas, and in other areas there are notable weaknesses.
The investigation showed that the following types of written information are, in general, satisfactorily formulated:
- Simplified prospectus
- Annual Reports
- Advertising material (for example sales brochures)
The survey revealed notable weaknesses regarding the requirements imposed on Swedish mutual fund companies in the context of a customer intending to purchase fund units contacting the company. Under the guise of presumptive customers, FI's employees contacted the mutual fund companies and only 10 out of 40 of these contacts provided complete information in accordance with the framework of regulations. In FI's opinion this is an unacceptable result.
FI assumes that all mutual fund companies will review their routines as soon as possible and take the necessary measures. It is particularly important that companies review and make improvements to the information provided to customers contacting the mutual fund company with the intention of purchasing fund units.
FI will follow up the results of the investigation during 2006. FI will also strengthen its supervision of the mutual fund area with additional investigations of, among other areas, information disclosure, financial advise and fees.
