ARTICLE
10 January 2017

SEC Updates Guidance On Mutual Fund Disclosures

CW
Cadwalader, Wickersham & Taft LLP

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Cadwalader, established in 1792, serves a diverse client base, including many of the world's leading financial institutions, funds and corporations. With offices in the United States and Europe, Cadwalader offers legal representation in antitrust, banking, corporate finance, corporate governance, executive compensation, financial restructuring, intellectual property, litigation, mergers and acquisitions, private equity, private wealth, real estate, regulation, securitization, structured finance, tax and white collar defense.
The SEC Division of Investment Management (the "Division") updated its guidance on mutual fund disclosure in order to facilitate compliance with the Department of Labor's fiduciary rule.
United States Finance and Banking

The SEC Division of Investment Management (the "Division") updated its guidance on mutual fund disclosure in order to facilitate compliance with the Department of Labor's fiduciary rule. The guidance concerns procedural requirements pertaining to (i) variations in fund sales loads and new fund share classes, and (ii) certain administrative procedures intended to streamline the review of disclosure filings.

As a response to the fiduciary rule, mutual funds have been "contemplating certain changes to [f]und fee structures that would, in certain instances, level the compensation provided to a financial intermediary." The Division stated that, in implementing new variations to sales loads that apply uniformly to investors that purchase fund shares through a single intermediary (or category of multiple intermediaries), funds must "specifically identify each [i]ntermediary whose investors receive a sales load variation." The Division added that it would not "object if lengthy sales load variation disclosure for multiple intermediaries is included in an appendix to the statutory prospectus."

The Division encouraged funds to "seek selective review" of filings related to new share classes if only certain aspects of their disclosures were changing. Further, the Division provided guidance to registrants on how to request selective reviews and "Template Filing Relief."

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