Mutual funds are one of the most widely held investment products by Americans and advertising is one method by which investors may obtain information on funds. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires GAO to conduct a review of mutual fund advertising, focusing on the advertising of past performance information. This report examines (1) what is known about the impact of fund advertisements on investors, (2) the extent to which performance information is included in advertisements, and (3) the regulatory requirements for fund advertisements and how they are administered and enforced. To address these objectives, GAO reviewed existing and proposed Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) rules, conducted a literature review of studies related to mutual fund advertising's impact on investors, and reviewed a random sample of 300 fund advertisements. GAO also met with regulators, fund companies, academics, and industry and investor protection groups.
Recommendations for Executive Action
|United States Securities and Exchange Commission||1. To help ensure that investors are better protected from potentially misleading advertisements, the Chairman, SEC, should take steps to ensure FINRA develops sufficient mechanisms to notify all fund companies of new interpretations of existing rules that arise during the course of FINRA's regulatory reviews of advertisements.|