"Complicated Public Fund Prospectuses to Be Made Easier to Understand"

Financial Supervisory Service Unveils Measures to Rationalize Public Fund Prospectuses

The Financial Supervisory Service announced on December 21 that the prospectuses for public offering funds, which have been complicated and difficult to understand, will be improved to make them easier to comprehend.

The Financial Supervisory Service explained that it operated a task force (TF) from April to June this year to rationalize public fund prospectuses and has established measures to improve explanatory practices at sales sites.

According to the Financial Supervisory Service's review, the prospectuses for public offering funds were not organized in an accessible manner, and excessive information due to overlapping and inconsistent items and terminology in the explanations hindered effective communication. This, combined with a rigid practice of reading the entire prospectus verbatim, resulted in unnecessary time consumption and distracted consumers' attention.

Going forward, explanation items that were previously scattered and duplicated across multiple documents will be integrated into a key prospectus, and the order of the items will be reorganized to make the products easier to understand. In addition, to ensure consistency between manufacturers (fund managers) and sellers (banks, securities firms, etc.), the order of items in the simplified investment prospectus prepared by the manufacturer will also be changed to match the key prospectus.

To improve consumer understanding, a research project will be conducted jointly with consumer organizations to refine the terminology and sentences in the prospectuses to better align with consumers' perspectives. Based on the results of this research, standards for revising the prospectuses will be established.

When financial companies conduct prior reviews of prospectuses, they will be required to use a checklist to thoroughly evaluate the comprehensibility of the documents for consumers under the supervision of a compliance officer or Chief Consumer Officer (CCO).

The Financial Supervisory Service emphasized that by the first half of next year, it will implement follow-up measures such as revising guidelines and corporate disclosure forms, preparing integrated prospectuses, and establishing systems within financial companies.