Monday, October 31. 2022
SEC Modernizes Fund Shareholder Reports to Promote Transparent Fee- and Expense-Related Information in Fund Advertisements
Specifically, the rule amendments will mandate that funds provide investors with concise, tailored shareholder reports that highlight key information. This information may include fund expenses, performance, and portfolio holdings. The rule amendments pertaining to fee disclosure information will apply to all registered investment company and business development company advertisements that include fee and expense figures. Through the report instructions, the SEC is further encouraging the use of graphics and text features to make reports more visually effective. The amendments also require that funds make certain in-depth information, which could be especially relevant to investors and financial professionals, available online and available for delivery free of charge on request. While this information will no longer appear in fund’s shareholder reports, it will be available electronically on a website identified in the shareholder report. This information must also be submitted to the SEC semi-annually on Form N-CSR.
In addition, funds will be required to tag the information in their reports in the structured data format, Inline XBRL. Finally, the SEC is making some changes to Form N-1A.
These final rule amendments will become effective 60 days after publication in the Federal Register. There will be an 18-month transition period after the effective date to allow open-end funds adequate time to adjust their shareholder reports and comply with the changes. The SEC is also allowing for an 18-month transition period after the effective date to comply with the final rule amendments to the advertising rules. Representations of fees that could be materially misleading will immediately be subject to the new rule changes on the effective date.
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