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WHIP OUT YOUR SCISSORS

Investors may soon be able to buy fund shares by mailing in a coupon

The idea of a "financial supermarket" is all but dead, but those that sell mutual funds may soon have one thing in common with their local grocers: They'll both accept coupons.

The Securities & Exchange Commission is proposing to let investors buy mutual funds by clipping a coupon from an ad in a publication or direct-mail promotion and sending it in with a check. If this initiative, known as "off-the-page" sales, is approved by SEC commissioners, it will allow fund managers that sell directly to the public, such as Fidelity, Vanguard, and Dreyfus, to accept money without first sending a prospectus.

Off-the-page sales level the playing field between direct marketers--mainly no-load funds--and broker-sold funds. Brokers can sell funds without first delivering a prospectus, though the prospectus must come with the customer's confirmation. Under the new plan, direct marketers would have to do the same.

NO RACE CARS. The off-the-page notion was raised last year in the SEC's wide-ranging review of fund regulations. A draft proposal was to be taken up by the commissioners on Mar. 18 and is believed to enjoy wide support. The final regulation could be in effect by this summer.

For fund companies, this new sales method can save millions. Roger Servison, head of retail marketing at Fidelity, says 85% of prospectuses are mailed to people who never buy the fund. Fidelity already has three new ads ready to run. Servison says this sales approach would work best for simple products such as money-market funds.

There's little room for flashy race cars or battery-powered bunnies in these ads. A sample ad released by the Investment Company Institute is packed with small type and bland language. That's because the new ads have to contain a "summary prospectus" with information on fees, risks, investment objective, and 1-year, 5-year, and 10-year performance data. They'll also be subject to stringent liability standards and size restrictions.

There is something else about the mutual-fund coupons that distinguish them from the supermarket sort: They can't be cashed in for a discount.Geoffrey Smith in Boston, with Michael Schroeder in Washington


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