SEC Proposes Improvements to Disclosure Framework for Mutual Funds and Exchange-Traded Funds

The SEC has issued a proposed rule, Tailored Shareholder Reports, Treatment of Annual Prospectus Updates for Existing Investors, and Improved Fee and Risk Disclosure for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements. The proposal would:

• Require “streamlined reports to shareholders that would include, among other things, fund expenses, performance, illustrations of holdings, and material fund changes.”
• Revise “the content of these items to better align disclosures with developments in the markets and investor expectations.”
• Encourage “funds to use graphic or text features—such as tables, bullet lists, and question-and-answer formats—to promote effective communication.”
• Promote “a layered and comprehensive disclosure framework by continuing to make available online certain information that is currently required in shareholder reports but may be less relevant to retail shareholders generally.”

For more information, see the press release as well as statements from Chairman Jay Clayton and Commissioners Hester M. Peirce, Allison H. Lee, and Elad L. Roisman on the SEC’s Web site.