On June 5, 2018, the SEC voted to improve the experience of investors who invest in mutual funds, exchange-traded funds, and other investment funds by releasing the Investment Company Disclosure and Delivery Rulemaking Package. This package contains three separate but related releases that are part of a long-term project led by the Division of Investment Management to explore the modernization of the design, delivery, and content of fund disclosures.
Tuesday, June 05. 2018
As a first step, the SEC adopted new Rule 30e-3, which creates optional “notice and access” methods for delivering shareholder reports. With the new rule, a fund may deliver reports by making them publicly accessible on a website free of charge and with written notice of the report’s availability mailed to investors. In addition, investors who wish to receive paper copies of reports may opt to continue to do so at any time, also free of charge. Notices of accessibility which must be delivered by the fund should contain information explaining to investors how to access the reports online and how to obtain paper copies if they so desire, among other required information. New Rule 30e-3 goes into effect January 1, 2021.
Also, the SEC is seeking public comment on additional ways to modernize fund information. This is an initial step in a long-term initiative to improve investor experiences by updating the design, delivery, and content of fund disclosures. The Commission would like information on how investors perceive the design, content, and delivery of fund-related data. Included in these topics:
• How well investment fund disclosures aid investors in their decisions and what types of documents (fund summary prospectuses, shareholder reports, etc.) are the most helpful
• What tools (such as FINRA’s Fund Analyzer) investors use to compare investment choices and products
• When investors receive fund disclosure documents relative to their investment decisions and the method of their delivery (electronic or paper, etc.)
• How investors use the internet in their investment decisions, including how they prefer to be contacted by their investment companies/financial advisers and how they would prefer to receive information
• If the SEC should promote, regulate, or better accommodate the use of different electronic platforms (such as the use of mobile devices to view and search financial information)
• If required fund disclosure documents are written in “plain language” and are easy to read and interpret
• How the SEC can encourage or require funds to display information in a more user-friendly manner, including the order of the information, the use of summaries and graphical data, and the format of the information
• How investors use the data provided in reports, including structured data that is tagged with XBRL, and whether or not enough information and the right information is being tagged as structured data
• If there is a need for additional structured information from mutual funds and exchange-traded funds beyond what is currently provided on the SEC’s website
• If the current amount of disclosure pertaining to a fund’s investment strategies, level of risk, expenses and fees, and performance is sufficient
In addition, the SEC is seeking comment concerning the processing fees that broker-dealers and other intermediaries charge funds in connection with forwarding shareholder reports and other materials. The Commission is interested in discussion and data on topics such as, but not limited to:
• the assessment of processing frees
• fee transparency
• fee remittances
• if another entity should oversee the structure and level of processing fees
• the appropriateness of fees in cases where intermediaries are separately paid shareholder servicing fees from fund assets
These two public comment periods will remain open until October 31, 2018. The SEC seeks input on these topics from industry professionals as well as from “every day” investors and other interested parties. The complete set of comment solicitations can be read in the full releases. You can submit comments using the form available on the SEC’s website or by e-mailing email@example.com with the reference number (S7-12-18) in the subject line. You can also use the Federal Rulemaking Portal to submit comments or send your comments by mail to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090. Again, please remember to include reference number S7-12-18.
You can also directly access the Fund Disclosure Feedback Flier here and submit your comments.
SEC Modernizes the Delivery of Fund Reports and Seeks Public Feedback on Improving Fund Disclosure (www.sec.gov)
Request for Comment on Fund Retail Investor Experience and Disclosure (www.sec.gov)
Fund Disclosure Feedback Flier (www.sec.gov)