MarketWatch columnist Chuck Jaffe writes that the Securities and Exchange Commission's new rules that require mutual funds to give investors a concise summary of the fund written "in plain English" sounds good, but still doesn't give investors what they need.

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The Securities and Exchange Commission recently enacted rules that require mutual funds to give investors a concise summary, written “in plain English,” of the key information needed to “make informed investment decisions.”

It sounds terrific — and will indeed be a positive — but it’s hardly a big victory because it can be summed up this way:

Fund companies are getting what they want, but fund investors still won’t be getting what they need.

What fund companies wanted was to eliminate the paper burden, the requirement of having to send copious documents to shareholders who, truth be told, never read them.

Fund firms also got reduced “registration liability,” which means they can give consumers a summary — rather than a full-blown document — and not be sued if the investor never bothers to do complete due diligence in scoping out the fund.

The traditional prospectus has been an obvious problem for years. An SEC survey found that most investors felt the documents contained too much information to absorb, and were hard to understand.

Enter the new user-friendly document, which is a two- to four-page summary covering the fund’s investment objectives, strategy, risks, details on purchasing or redeeming shares, the manager, the fund firm and more.

“The new approach will require that a mutual fund’s full prospectus, with all of the legalese that appeals to a much smaller percentage of the investor population, be easily available on the Internet,” SEC Chairman Christopher Cox said in announcing the change.

“That way, everyone who wants to drill down into the details will have the opportunity to do so. They will have more searchable information on the Internet that will be easier to analyze than the long paper documents. And of course, anyone who wants a long paper document can still get that as well.”

It is a reasonable solution, but it doesn’t go far enough.

Here’s where the SEC needed to go further, where it needed to prod fund firms into not only providing the useful information, but also supplying meaningful stuff.

Descriptions of strategy and investment objective, for example, typically do not say if the manager intends to be fully invested or go to cash.

As the current market conditions have proven, that’s a big deal; a manager who has stayed fully invested is following the marching orders laid out by the fund’s name, but isn’t necessarily protecting shareholders from pain.

An investor should know upfront if the manager intends to try beating the benchmark by outsmarting the asset class, or if they plan to tough it out in all conditions.

Likewise, fund firms know which of their funds shouldn’t be combined in an investment portfolio, because their overlap concentrates the investor’s risk.

They should have to include a note saying that investors who already own specific sister funds may find that the fund they are reviewing would not add significant diversification to their portfolio.

Alas, those helpful items won’t be in the new prospectus; it’s just the same old stuff served on a smaller platter.

“This gives the people what they think they want, which is less paper to throw out and less information to go through to get to the basics on a fund,” says industry consultant Geoff Bobroff of East Greenwich, R.I.

“But it doesn’t functionally change the dynamics much. It’s the same kind of information, presented in a short form; what’s missing is the context and details that help you pick one fund from another and decide ‘This is the kind of fund I want, and this is the right fund in that group for me.’ “

Chuck Jaffe is a senior columnist at MarketWatch columnist. He can be reached at cjaffe@marketwatch.com or Box 70, Cohasset, MA 02025-0070.