SEC Adopts Amendments to Streamline Mutual Fund and ETF Shareholder Reports and Revise Investment Company Advertising Rules
On October 26, 2022, the Securities and Exchange Commission (SEC) adopted a new streamlined disclosure framework for open-end funds requiring “concise and visually engaging” shareholder reports highlighting key information, including a simplified expense presentation, performance information, portfolio holdings and certain fund statistics. Notably, mutual funds and ETFs that are registered on Form N-1A (i.e., open-end funds) will be required to prepare individual shareholder reports for each fund and—in a change from the SEC’s proposal—for each share class separately. Additionally, open-end funds will be excluded from the scope of the Investment Company Act’s e-delivery rule, Rule 30e-3—which took effect on January 1, 2021—meaning that the new tailored shareholder reports must be mailed to shareholders, rather than just made available online, unless a shareholder affirmatively opts-in to electronic delivery. The amendments also include a revised definition of “appropriate broad-based securities market index” that will affect performance presentations in prospectuses—in addition to the streamlined shareholder report.
In addition to streamlining open-end fund shareholder reports, the SEC adopted amendments to investment company advertising rules to require that fee and expense presentations in registered investment company and business development company advertisements and sales literature be consistent with relevant prospectus fee table presentations and be reasonably current.
The amendments will become effective 60 days after publication in the Federal Register; funds will be required to comply with the amendments at the conclusion of an 18-month transition period following the effective date. Proposed changes to prospectus delivery requirements and prospectus risk and fee disclosure were not adopted.
The SEC’s adopting release is available here. Please contact a member of Vedder Price’s Investment Services Group if you have any questions.
More information about the Investment Services Group is available here. Click here for recent ISG publications.
Vedder Thinking | Articles SEC Adopts Amendments to Streamline Mutual Fund and ETF Shareholder Reports and Revise Investment Company Advertising Rules
Article
November 1, 2022
On October 26, 2022, the Securities and Exchange Commission (SEC) adopted a new streamlined disclosure framework for open-end funds requiring “concise and visually engaging” shareholder reports highlighting key information, including a simplified expense presentation, performance information, portfolio holdings and certain fund statistics. Notably, mutual funds and ETFs that are registered on Form N-1A (i.e., open-end funds) will be required to prepare individual shareholder reports for each fund and—in a change from the SEC’s proposal—for each share class separately. Additionally, open-end funds will be excluded from the scope of the Investment Company Act’s e-delivery rule, Rule 30e-3—which took effect on January 1, 2021—meaning that the new tailored shareholder reports must be mailed to shareholders, rather than just made available online, unless a shareholder affirmatively opts-in to electronic delivery. The amendments also include a revised definition of “appropriate broad-based securities market index” that will affect performance presentations in prospectuses—in addition to the streamlined shareholder report.
In addition to streamlining open-end fund shareholder reports, the SEC adopted amendments to investment company advertising rules to require that fee and expense presentations in registered investment company and business development company advertisements and sales literature be consistent with relevant prospectus fee table presentations and be reasonably current.
The amendments will become effective 60 days after publication in the Federal Register; funds will be required to comply with the amendments at the conclusion of an 18-month transition period following the effective date. Proposed changes to prospectus delivery requirements and prospectus risk and fee disclosure were not adopted.
The SEC’s adopting release is available here. Please contact a member of Vedder Price’s Investment Services Group if you have any questions.
More information about the Investment Services Group is available here. Click here for recent ISG publications.
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