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Statement on Final Rule Regarding Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements

Oct. 26, 2022

Thank you, Chair Gensler. Today, we are voting on the recommendation to finalize rule and form amendments intended to require mutual funds and exchange-traded funds (“ETFs”) to transmit concise and visually engaging reports to shareholders.

In 2009, the Commission adopted amendments to require mutual funds and ETFs to include a summary section at the front of the statutory prospectus.[1] These funds were also permitted to provide a summary prospectus containing “streamlined and user-friendly information that is key to an investment decision,” with more-detailed information available online.[2] At the time, the Commission stated that the layered disclosure framework that “we are adopting has the potential to revolutionize the provision of information to the millions of investors who rely on mutual funds for their most basic financial needs.”[3]

It was a privilege to be part of the team within the Division of Investment Management that worked on the summary prospectus. After that project, we started working on making the shareholder reports more effective for investors. Unfortunately, the financial crisis and the subsequent efforts to implement the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act[4] (“Dodd-Frank Act”) delayed those efforts, but I am pleased we ultimately were able to return to that work.

Today, the Commission is expanding the layered disclosure framework to funds’ shareholder reports. My expectation is that fund investors will benefit from the ability to monitor and assess their ongoing investments in a concise, easy-to-understand format. Importantly, fund investors will not lose access to the information that no longer will appear in funds’ shareholder reports, such as the financial statements and accompanying notes. This information will be available on a fund’s website and in its Form N-CSR filing, and fund investors also may request paper copies of this additional information by mail.

Section 912 of the Dodd-Frank Act authorizes the Commission to engage in investor testing programs for the purpose of evaluating any of its rules or programs.[5] Under this authority, the Commission staff engaged in investor testing with respect to shareholder reports in 2011. I am pleased that the features of the streamlined shareholder reports introduced by today’s amendments are responsive to the feedback that we received in connection with that prior testing.[6] Additionally, when the Commission proposed these amendments in 2020,[7] it published a hypothetical annual report[8] to illustrate what a more concise, tailored shareholder report could look like. One commenter engaged a market research firm to distribute the hypothetical report to individual mutual fund and/or ETF investors.[9] The commenter reported that – of the more than 2,000 investors who provided responses to a feedback flier that accompanied the hypothetical report[10] – at least 91% stated that the streamlined shareholder report format was useful for monitoring their fund investments.[11] I am encouraged by the results of this empirical testing.

Open-end funds will no longer be able to rely on Rule 30e-3 under the Investment Company Act of 1940.[12] Rule 30e-3, adopted in 2018, permits funds to satisfy applicable shareholder report delivery requirements by sending paper notices that a shareholder report is available at an identified website address, unless an investor has instead consented to electronic delivery of the notice.[13] While I appreciate the industry efforts to implement Rule 30e-3, that rule was adopted at a time when form requirements caused shareholder reports to be quite voluminous.[14] Because today’s amendments contemplate shareholder reports that are 3-4 pages in length, the underlying conditions have fundamentally changed. Accordingly, the significant reduction in the size of shareholder reports ultimately justifies the rescission of Rule 30e-3 with respect to open-end funds and ETFs.

Finally, the Commission today is adopting amendments to investment company advertising rules designed to promote transparent and balanced presentations of fees and expenses in advertisements. These amendments will apply to all investment companies that are subject to the Commission’s advertising rules, including mutual funds, ETFs, registered closed-end funds, and business development companies. An understanding of a fund’s fees and expenses – both on a standalone basis and in comparison to other funds – is an important consideration when making an investment. Accordingly, I am pleased that today’s amendments regarding investment company advertising will empower investors to make more informed investment decisions.

For these reasons, I support today’s amendments, although I agree with Commissioner Peirce that the Commission should address concerns regarding the disclosure requirements related to acquired fund fees and expenses.[15] I thank the staff in the Divisions of Investment Management and Economic and Risk Analysis, as well as the Office of the General Counsel, for their efforts. I also want to acknowledge the staff’s efforts in preparing a comprehensive summary of the public comments received on the proposal, which was very helpful in reviewing the staff’s recommendation.

[1] See Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies, Investment Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4545 (Jan. 26, 2009)], available at

[2] Id.

[3] Id.

[4] Pub. L. No. 111-203, 124 Stat. 1376 (2010).

[5] Id. at § 912, 124 Stat. 1376, 1824.

[6] For example, we had identified that shareholder reports for certain types of funds – such as index funds that track a total stock market index – can be quite lengthy due to the large number of entries on the schedules of investments.

[7] Tailored Shareholder Reports, Treatment of Annual Prospectus Updates for Existing Investors, and Improved Fee and Risk Disclosure for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements, Investment Company Act Release No. 33963 (Aug. 5, 2020) [85 FR 70716 (Nov. 5, 2020)], available at

[8] See Hypothetical Streamlined Shareholder Report, available at

[9] Comment Letter of Broadridge Financial Solutions, Inc. (Jan. 4, 2021), available at

[10] See Shareholder Report Feedback Flier, available at

[11] Comment Letter of Broadridge Financial Solutions, Inc., supra note 7.

[12] 17 CFR 270.30e-3.

[13] See Optional Internet Availability of Investment Company Shareholder Reports, Investment Company Act Release No. 33115 (June 5, 2018) [83 FR 29158 (June 22, 2018)], available at

[14] The adopting release for today’s amendments notes that an analysis conducted by the Commission’s staff reveals that the average annual report is approximately 134 pages long, and the average semi-annual report is 116 pages long. See Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements, Investment Company Act Release No.34731 (Oct. 26, 2022), available at

[15] See Hester M. Peirce, One Good Step, More to Go: Statement on Final Tailored Shareholder Reports for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements (Oct. 26, 2022), available at

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