SEC Proposes Modernizations to Fund Shareholder Reports and Disclosures

August 7, 2020

On August 5, 2020, the SEC proposed rule and form amendments to modernize the disclosure framework for open-end funds (including mutual funds and ETFs) with respect to shareholder reports and ongoing prospectus updates (Amendments).  The Amendments would streamline shareholder reports for open-end funds to require these reports to highlight and summarize information on fund expenses, performance, and holdings, and material fund changes, and would bifurcate an open-end fund’s financial reporting obligations by moving certain information currently required to be disclosed in shareholder reports (such as detailed financial statements) to the fund’s Form N-CSR filing.

The Amendments would also provide a safe harbor that would exempt an open-end fund from delivering an updated prospectus to shareholders annually, provided updated offering materials are posted on the fund’s website, shareholders receive paper copies upon request and shareholders receive notice of certain material changes.  In addition, the Amendments would modify Rule 30e-3, which previously would have permitted a fund to electronically deliver shareholder reports by default rather than only to shareholders that consented to electronic delivery, to no longer apply to open-end funds.

The press release and proposing release are available at the links below:

https://www.sec.gov/news/press-release/2020-172

https://www.sec.gov/rules/proposed/2020/33-10814.pdf


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Investment Companies, Regulatory