The NASD is recommending the Securities and Exchange Commission improve point of sale disclosure to mutual fund investors by mandating a new Internet-based disclosure document.

The “Profile Plus” would be a two-page document providing basic information about a mutual fund, including its investment objectives, risks, performance, fees and expenses, and information about potential conflicts of interest.

The NASD is also recommending that every broker-dealer be required to post a “Profile Plus” for each mutual fund it sells on the broker-dealer’s website, with hyperlinks to the fund’s prospectus and to a dealer disclosure statement with more information about the broker-dealer’s potential conflicts of interest. Investors would also have the option of requesting paper delivery of the document.

The creation of the Profile Plus is the chief recommendation of NASD’s Mutual Fund Task Force in Mutual Fund Distribution, its second and final report to the SEC. The recommendation was guided by the results of focus groups with investors, who indicated a strong preference for website delivery of disclosure and a high level of enthusiasm for the format of Profile Plus.

NASD chairman and CEO Robert Glauber endorsed the task force’s recommendations in the NASD’s comment letter regarding an SEC rule proposal on point of sale disclosure requirements and confirmation requirements in mutual funds, college savings plans and other securities.

“The SEC proposal is an excellent effort that properly focuses on getting more, better and clearer information to investors at the most important time – prior to purchase,” Glauber said. “Good point of sale information is crucial for investors, and Profile Plus would build on the SEC’s proposal by adding information about investment risks, objectives and performance – three of the most important things investors need to consider when purchasing a mutual fund.”

“Using the Internet for point-of-sale disclosure moves us into the 21st Century, so that investors have an alternative to more piles of paper,” Glauber said. “Giving investors a concise disclosure document with access to more detailed information through hyperlinks, a web-based Profile Plus would allow them to review as much or as little detail about a fund as they wish. And it would make comparing all funds offered by a particular broker-dealer much easier.”