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Mutual Fund Performance Advertising: Inherently And Materially Misleading?, Ahmed E. Taha, Alan Palmiter
Mutual Fund Performance Advertising: Inherently And Materially Misleading?, Ahmed E. Taha, Alan Palmiter
Ahmed E Taha
Mutual fund companies routinely advertise the past returns of their strong-performing, actively-managed equity funds. These performance advertisements imply that the advertised high past returns are likely to continue. Indeed, investors flock to these funds despite high past returns being a poor predictor of high future returns. Thus, fund performance advertising is inherently and materially misleading and violates federal securities antifraud standards. In addition, the SEC-mandated warning in these advertisements that “past performance does not guarantee future results” fails to temper investors’ focus on past returns.
The SEC should do more to prevent investors from being misled by fund performance advertisements. …
Mutual Fund Investors: Divergent Profiles, Alan R. Palmiter, Ahmed E. Taha
Mutual Fund Investors: Divergent Profiles, Alan R. Palmiter, Ahmed E. Taha
Ahmed E Taha
Mutual funds are owned by almost half of all U.S. households, manage over $12 trillion dollars in assets, and have become a primary vehicle for retirement and investment savings in the United States. Who are mutual fund investors? The answer is critical to regulatory policy for the mutual fund industry. Fund investors, by selecting the funds in which they invest, play a central role in determining asset allocation and in controlling the fees and expenses that funds charge. Thus, the functioning of the mutual fund market turns on the knowledge and financial sophistication of fund investors.
This article examines the …