SEC Proposes Wholesale Overhaul to Mutual Fund and Exchange-Traded Fund Shareholder Reporting

The SEC is proposing a package of new rules that would streamline shareholder reports for mutual funds and exchange-traded funds. The proposals would allow annual reports to stand in for many annual prospectus update mailings, and generally reimagine how funds communicate with current shareholders. These are strikingly ambitious changes that, if adopted, will require significant investment and thought to implement.
 
The proposed amendments would, among other things, replace existing annual and semi-annual shareholder reports for mutual funds and exchange-traded funds with a wholly new and much shorter format, require that these new shareholder reports be mailed (or emailed, with respect to shareholders electing electronic delivery), establish an optional approach for prospectus delivery to existing shareholders (which could leverage the new requirement to include an annual summary of material fund changes in annual shareholder reports), change how fees and expenses and principal risks are presented in fund prospectuses, and require standardized treatment of expenses in fund advertising.

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