The US Securities and Exchange Commission (SEC) recently finalized rule and form amendments (Adopted Rules) that require mutual funds and most exchange-traded funds (ETFs) to provide shareholders with streamlined and “visually engaging” shareholder reports. The Adopted Rules include significant changes to both the content and the presentation of information in shareholder reports, summarizing certain key information and moving other information that is currently included in shareholder reports to other SEC filings (e.g., Form N-CSR) and to fund websites. These changes are part of the SEC’s investor experience initiative and its effort to modernize shareholder disclosures and implement layered disclosure approaches.
- The Adopted Rules further the SEC’s implementation of a “layered disclosure” approach, providing key information directly to investors, and allowing more detailed information to be accessed through fund websites or other SEC filings.
- The new shareholder reports, similar to summary prospectuses, are expected to be significantly shorter than current reports, with a focus on key information relevant to shareholders and provided in a “visually engaging” format.
- Shareholder reports will need to be specific to a shareholder’s fund and share class.
- Information contained in shareholder reports will be required to be tagged in Inline XBRL format.
- Rule 30e-3 (which permits funds to deliver shareholder reports through notice and access) will no longer be available for mutual funds and ETFs, which will reintroduce certain operational processes for funds.
- The Adopted Rules include a definition of “appropriate broad-based securities market index” and will require funds to include such an index in the performance line graph in both prospectuses and shareholder reports.
- Funds will be required to present fees and expenses in advertisements and sales literature consistent with relevant fee table presentations in fund prospectuses.
- The compliance period for almost all changes is 18 months after the effective date of the Adopted Rules.