Clifford Chance

SEC Adopts Amendments To Fund Shareholder Reports And Fee-And Expense-Related Disclosure In Fund Advertising

November 2, 2022

On October 26, 2022, the U.S. Securities and Exchange Commission unanimously voted to adopt Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements (the "Adopting Release") which is designed to provide mutual fund and exchange-traded fund investors with clear and concise information in shareholder reports. According to the Adopting Release, the new requirements will require layered disclosure in shareholder reports, with a summary highlighting important information, such as expenses, performance and portfolio holdings, with more detailed disclosures to be provided either online or in physical form, as requested by shareholders, and filed with the SEC on a semi-annual basis on Form N-CSR. The Adopting Release also excludes mutual funds and ETFs from Rule 30e-3 under the Investment Company Act of 1940, as amended (the "Investment Company Act"), requiring paper delivery of shareholder reports in order to satisfy delivery requirements.

In addition, the SEC decided to amend certain fund advertising rules to require that investment company advertisements and sales materials include fees and expenses in a manner consistent with the applicable prospectus.

This Client Alert provides details regarding the Adopting Release, including how it will impact the information mutual funds and ETFs must provide to current and prospective shareholders in reports and advertising materials.

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