On Oct. 26, 2022, the Securities and Exchange Commission (SEC) unanimously voted to amend the annual and semi-annual shareholder report requirements for mutual funds and ETFs (Funds). The amendments, which require that Funds provide shareholders “concise and visually engaging” annual and semiannual reports, are aimed at ensuring that retail investors are better able to understand the performances, fees and other key information of their Fund investments. The new, shorter reports are required to be sent directly to investors, either electronically or through mail (and they may no longer simply be made available online).

In short, the new, simplified reports would highlight key Fund information, such as Fund expenses, performance, and portfolio holdings. The form instructions would also encourage use of graphics to enhance readability. In general, the remaining Fund information that currently appears in annual and semiannual reports would continue to be made available free of charge to investors on the Funds’ websites, and must be filed semiannually with the SEC on Form N-CSR. Chairman Gary Gensler referred to the new reporting requirements as a “layered approach” that ensures that those investors that wish to see all information that the Funds are required to disclose are still able to obtain it.

Finally, the amendments would require that all presentations of investment company fees and expenses in advertisements and sales literature be consistent with prospectus fee tables and be reasonably current.

The amendments do not extend to closed-end funds, BDCs and other registrants that do not utilize Form N-1A. The amendments will have an 18-month transition period to allow Funds to adjust their shareholder reports and otherwise comply with the amendments. The press release and full text of the amendments can be found here.

Related Practices