SEC Requires Mutual Funds and ETFs to Make Disclosures Concise and Visually Engaging

The SEC adopted amendments designed to tailor mutual fund and ETF disclosures to the needs of retail investors by updating the standards of information required in annual and semi annual reports (see prior coverage). The final rule will amend the mutual fund and ETF disclosure framework by:

• condensing annual and semi-annual shareholder reports to ensure that they are concise, visually engaging and designed to highlight information that is materially substantial to investors. This includes fund expenses, performance and portfolio holdings;

• requiring funds to tag their reports using Inline XBRL structured data language to allow investors to use automated analytical tools to extract information within the filings;

• requiring funds to make more relevant and in-depth financial information available to investors electronically and free of charge. The rule will also require this information to be made available on Form N-CSR filings on a semi annual basis; and

• mandating that company fee and expense information in advertisements and sales literature be consistent with prospectus fee table presentations, and be reasonably current.

The final rule will become effective 60 days after publication in the Federal Register, and the SEC is allowing for an 18-month compliance transition period.

The SEC's commissioners supported the final rule unanimously. SEC Chair Gary Gensler said that the final rule will "help investors better understand fund disclosures and help ensure that the information investors receive in investment company advertisements is transparent and balanced." Commissioners Hester M. Peirce and Mark T. Uyeda added that the SEC should address concerns regarding the disclosure requirements related to acquired fund fees and expenses in the future.