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Statement at an Open Meeting on Investment Company and Investment Adviser Reporting

Commissioner Kara M. Stein

May 20, 2015

I want to begin by thanking the staff for all their hard work on these proposed rules.  I would particularly like to thank the rulemaking staff from the Division of Investment Management for presenting the two proposals before us today.  I know it wasn’t easy, and I appreciate all of your efforts.

I am pleased to support both proposals.  Today’s proposals should enhance the transparency of reports that are filed with the Commission.  Each is a long-needed attempt to improve and modernize Commission disclosure forms to fit the current marketplace.  The end product hopefully will be higher quality information that improves both the Commission’s and the public’s understanding of the entities that the Commission oversees. 

Registered funds have emerged to become the primary vehicle for American investors to interact with the markets.[1]  Most Americans know these vehicles as “mutual funds” or “ETFs.”  If you have a 401k account for your retirement savings or a 529 plan for your child’s college tuition, you are very likely a shareholder in registered funds.  Given the importance of these funds to the economy and to the American people, it is critical that they are transparent and investors have access to the data they need to make appropriate investment decisions.  That is what today’s proposals are all about.

Today’s Investment Company Reporting Modernization Proposal focuses directly on these particular investment funds and their disclosures.  The Investment Company Act establishes the regulatory framework for registered funds.  It mandates detailed reporting by these funds to the Commission and to the public.  It mandates disclosure of numerous items, including portfolio holdings, fund census data, and financial statements.  The Commission has acted many times to update and revise its disclosure forms for registered funds.[2]  The proposal before us today is the Commission’s latest effort in modernizing these disclosures to reflect both a changing industry and advances in technology.

This proposal should also improve the frequency, quality, and usability of the information that registered funds report.  Instead of receiving quarterly filings from funds - which is the current practice - the Commission would receive monthly filings.  This enhanced information will aid the Commission in countless ways, including informing its policy choices and assisting with risk monitoring efforts.

As a result of this proposal, the quality of the information that registered funds provide should greatly improve in many areas.  Mutual funds have increasingly pushed into strategies and asset classes that the Commission’s current reporting forms were not designed for.  The Investment Company Reporting Modernization Proposal recognizes this gap and requires, for the first time, standardized information on derivatives, detailed counterparty exposures, and portfolio level risk metrics.  This updated information should help the Commission keep pace with developments in the registered fund industry as it continues to evolve.

This proposal also would result in vast amounts of new data being reported to the Commission and to the public.  I am pleased to see that funds will file reports with the Commission in structured, XML format.[3]  This will make the data much easier to analyze, aggregate, and compare.  Currently, this data is unstructured, presented in antiquated formats, and difficult to use. The proposal should allow the Commission, investors, and other third party users to analyze portfolio data on a fund-by-fund basis and also across funds.

I also wanted to share some brief thoughts on the other, much shorter proposal before us today, which I will call the Investment Adviser Reporting Proposal.  Investment advisers are persons engaged in the business of providing investment recommendations to clients for compensation.[4]  Investment advisers file an initial registration and annual disclosure form with the Commission, known as Form ADV.  Form ADV is available to the public and serves as a registration form, a data reporting filing to the Commission, and as the primary disclosure document for clients.[5]  So, it is vitally important that the Commission continually update and refine this form to ensure that it asks the right questions and provides robust disclosure to investors.  As markets evolve, disclosure and reporting forms like Form ADV must keep pace.

Today’s proposal makes numerous sensible revisions.  These revisions should help to modernize the information being reported to clients and the Commission.  The Commission has updated investment adviser reporting numerous times, just as it has for registered funds.  Most recently, the Commission adopted enhanced reporting requirements for advisers to private funds, as part of Dodd-Frank’s private fund adviser registration requirements.[6]  Today’s proposal is more limited but still makes important enhancements to fill potential data gaps, including in the area of separately managed accounts.

I am very interested in hearing commenters’ views on both proposals today.  I am particularly interested in views on the public availability of mutual fund data reporting, and whether the Commission should require funds to disclose more than four data points annually to the public. I also want to hear from commenters on the delivery of shareholder reports, and whether electronic delivery as the default, instead of paper delivery, is appropriate.  Finally, I am eager to hear commenters’ thoughts on Form ADV’s collection of separately managed account information.  Is this information useful for risk monitoring purposes?  Should the Commission be obtaining more or different information on these accounts? 

I am pleased to support both of these proposals.  I think that they represent a significant and much needed step forward in modernizing and improving the information the Commission collects.  Thank you again to the staff for all of your hard work. 

[1] See generally 2015 Investment Company Fact Book, available at

[2] See Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies, Investment Company Act Release No. 28584 (Jan. 13, 2009); see Shareholder Choice Regarding Proxy Materials, Investment Company Act Release No. 27911 (July 26, 2007). 

[3] I have advocated numerous times for the Commission to continue to require that information be provided to it in structured format.  See, e.g., Commissioner Kara M. Stein, “Remarks before the Consumer Federation of America’s 27th Annual Financial Services Conference,” Dec. 4, 2014, available at

[4] See Section 202(a)(11) of the Investment Advisers Act of 1940.

[5] See Form ADV, available at

[6] See Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers Act Release No. 3221 (June 22, 2011).

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