SEC Pushes Fees and Performance Transparency in Mutual Funds, ETFs | Jobs Vox


Federal regulators on Wednesday approved rule changes intended to make it easier for consumers to understand what they’re investing in and how much it’s costing them.

Investment company advertisements must promote a “transparent and balanced presentation” of fees and expenses, according to amendments approved by the Securities and Exchange Commission.

Additionally, shareholder reports from mutual funds and traded funds must be “concise and visually engaging,” according to the SEC.

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β€œTo understand mutual fund performance, fees and other operations, a retail investor or [ETF] According to SEC Chairman Gary Gensler, extensive financial disclosures may be required.

“Today’s final rules require fund companies to share concise materials that get to the heart of the matter,” Gensler said.

Key fund information should be highlighted

For shareholder reports, key information – such as fund expenses, performance and portfolio holdings – should be highlighted. The use of graphical and textual features is also encouraged, making the online versions of the reports more user-friendly and interactive.

Today, these reports can be 100 pages or more, according to the SEC.

Payments in advertisements should be clear

Regarding advertising updates: Fees and expenses provisions in advertisements and sales literature must be consistent with the required information in the prospectus fee schedule and must be “reasonably” up-to-date. Nor can they be materialistically deceptive.

Fees that fund investors eat into their returns. For example, $100,000 invested over 20 years at 4% per year would pay $10,000 at 0.5% per year, compared to 0.25%, according to the SEC’s Office of Investor Education and Advocacy.

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It may be a while before investors notice changes from the changes they received.

While the amendments will take effect 60 days after they are published in the Federal Register, the SEC said it is providing an 18-month transition period to give investment firms time to adjust their shareholder reports and comply with ad fee rules.

Amendments regarding erroneous payments and expenses will take effect on the Effective Date.


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