On August 1, 2017, new rules that require funds to describe their securities lending activities will go into effect.
These amendments entail filers providing additional information on their securities lending activities, including gross and net income and expenses. The SEC believes net earnings from securities lending, and the fees associated with the lending action itself, can influence a fund’s investment performance and should therefore be publicly disclosed to heighten transparency for investors.
The new amendments will impact the Statements of Additional Information for fund registration Forms N-1A and N-3, as well as for Form CSR for closed-end funds. Specifically, filers using these forms will now be required to disclose fees and compensation derived from securities lending activities in a table (see below), which will aid investors by making the information more easily comparable among different funds.
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| SECURITIES LENDING ACTIVITIES |
| Gross income from securities lending activities |
$ |
|
| Fees and/or compensation for securities lending activities and related services |
|
|
| Fees paid to securities lending agent from a revenue split |
$ |
|
| Fees paid for any cash collateral management service (including fees deducted from a pooled cash collateral reinvestment vehicle) that are not included in the revenue split |
$ |
|
| Administrative fees not included in revenue split |
$ |
|
| Indemnification fee not included in revenue split |
$ |
|
| Rebate (paid to borrower) |
$ |
|
| Other fees not included in revenue split (specify) |
$ |
|
| Aggregate fees/compensation for securities lending activities |
$ |
|
| Net income from securities lending activities |
$ |
|
The amendments were made as part of an omnibus effort by the SEC to modernize investment company reporting. To read more about the changes, see this previous blog post and the published Final Rule.
Other regulations and rule amendments that impact mutual funds and investment companies are still forthcoming this year and in 2018. We will keep you apprised of all changes to filing forms as they become mandatory and applicable.
Sources
Investment Company Reporting Modernization (Release Nos. 33-10231; IC-32314) (www.sec.gov)
SEC Adopts Rules to Modernize Information Reported by Funds, Require Liquidity Risk Management Programs, and Permit Swing Pricing (www.sec.gov)
