Interactive Data for Mutual Fund Risk/Return Summary
A Small Entity Compliance Guide1
The Securities and Exchange Commission has adopted rule amendments to rules 485 and 497 under the Securities Act of 1933 ("Securities Act"), rules 11, 202, 401, and 405 of Regulation S-T, and amendments to Form N-1A under the Securities Act and the Investment Company Act of 1940 ("Investment Company Act") to require open-end management investment companies ("mutual funds") to provide the risk/return summary section of their prospectuses to the Commission and on their Web sites, if they maintain one, in interactive data format using eXtensible Business Reporting Language or XBRL. The rule amendments also permit investment companies to submit portfolio holdings information in the Commission's voluntary interactive data program without being required to submit other financial information in an interactive data format.
The risk/return summary section of a mutual fund prospectus contains information about a fund's investment objectives and strategies, costs, risks, and past performance. Risk/return summary information in interactive data format requires a standard list of tags. The tags establish a consistent structure of identity and context. This consistent structure can be recognized and processed by a variety of different software applications, making tagged data "interactive," that is, data that can be retrieved, searched, and analyzed through automated means, such as databases, financial reporting systems, and spreadsheets, that recognize and process tagged information.
Requiring mutual funds to submit the risk/return summary section of their prospectuses using interactive data will enable investors, analysts, and the Commission staff to capture and analyze that information more quickly and at less cost than is possible using the same information provided in the traditional format. Any investor with a computer and an Internet connection will have the ability to acquire and download data that have generally been available only to intermediaries and third-party analysts. The rule amendments do not change disclosure requirements under the federal securities laws and regulations, but add a requirement to include risk/return summary information in interactive data format as an exhibit. In other words, requiring filers to provide risk/return summary information using XBRL will not otherwise alter the disclosure or formatting standards of mutual fund prospectuses. These filings will continue to be available as they are today for those who prefer to view the traditional text-based document.
Specifics of the Amendments
The amendments, among other things, require mutual funds to submit a complete set of their risk/return summary information, set forth in Items 2, 3, and 4 of Form N-1A,2 in interactive data format. The principal elements of the rule amendments are as follows:
As was the case in the voluntary program, the new requirement for interactive data reporting is intended to be disclosure neutral in that we do not intend the rules to result in mutual funds providing more, less, or different disclosure for any given disclosure item, regardless of the format of the electronic filing.
The adopting release for Interactive Data for Mutual Fund Risk/Return Summary can be found on the SEC's Web site at http://www.sec.gov/rules/final/2009/33-9006.pdf.
The adopting release for Interactive Data to Improve Financial Reporting can be found on the SEC's Web site at http://www.sec.gov/rules/final/2009/33-9002.pdf.
Rules 485 and 497 under the Securities Act and Regulation S-T rules can be accessed through the "Corporation Finance" section of the SEC's Web site at http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml.
Form N-1A can be accessed through the "Securities and Exchange Commission Forms List" of the SEC's Web site at http://www.sec.gov/about/forms/secforms.htm.
The Commission's EDGAR Filer Manual is available at http://www.sec.gov/info/edgar.shtml.
Additional materials regarding interactive data generally are available at http://www.sec.gov/spotlight/xbrl.shtml.
Contacting the SEC
The SEC's Division of Investment Management is happy to assist small companies with questions regarding mutual fund disclosure. You can contact the Division's Office of Disclosure Regulation at (202) 551-6784.
1 This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a "small entity compliance guide" under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains rules adopted by the SEC, but is not a substitute for any rule itself. Only the rule itself can provide complete and definitive information regarding its requirements.
2 Form N-1A is the form used by mutual funds to register under the Investment Company Act and to offer securities under the Securities Act.
3 Risk/return summary information in interactive data format is required as an exhibit to a registration statement or post-effective amendment thereto that contains risk/return summary information and to any form of prospectus filed pursuant to rule 497(c) or (e) under the Securities Act that contains risk/return summary information that varies from the registration statement. Such interactive data is not required as an exhibit to a post-effective amendment that does not contain risk/return summary information or to a form of prospectus filed pursuant to rule 497(c) or (e) that does not contain risk/return summary information that varies from the registration statement. For a discussion of rule 497(c) and (e) under the Securities Act, see note 5.
4 A post-effective amendment filed under rule 485(b) under the Securities Act may become effective immediately upon filing. A post-effective amendment may only be filed under rule 485(b) if it is filed for one or more specified purposes, including to make non-material changes to the registration statement.
5 Rule 497(c) under the Securities Act requires mutual funds to file, within five days after the effective date of a registration statement or the commencement of a public offering after the effective date of a registration statement, whichever occurs later, ten copies of each form of prospectus and form of statement of additional information ("SAI") used after the effective date. Rule 497(e) under the Securities Act provides that, after the effective date of a registration statement, no prospectus that purports to comply with Section 10 of the Securities Act or SAI that varies from any form of prospectus or form of SAI filed pursuant to rule 497(c) shall be used until filed with the Commission.
6 Rule 405 of Regulation S-T directly sets forth the basic tagging requirements and indirectly sets forth the rest of the tagging requirements through the requirement to comply with the EDGAR Filer Manual.
7 The interactive data file is deemed filed for purposes of Rule 103 of Regulation S-T and, as a result, in general, the mutual fund would not be subject to liability for electronic transmission errors beyond its control if the mutual fund corrects the problem through an amendment as soon as reasonably practicable after the fund becomes aware of the problem.
8 Business development companies are a category of closed-end investment companies that are not required to register under the Investment Company Act. See Section 2(a)(48) of the Investment Company Act.