Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-end Management Investment Companies
A Small Entity Compliance Guide1
On January 13, 2009, the Securities and Exchange Commission ("SEC") issued amendments to Form N-1A, the registration form used by mutual funds, in order to enhance the disclosures that are provided to mutual fund investors. The amendments require key information to appear in plain English in a standardized order at the front of the mutual fund statutory prospectus. The SEC also issued amendments to rule 498 that permit mutual funds to satisfy their prospectus delivery obligations under the Federal securities laws by sending or giving the key information directly to investors in the form of a "Summary Prospectus" and providing the statutory prospectus on an Internet Web site. Upon an investor's request, mutual funds are also required to send the statutory prospectus to the investor. These amendments are intended to improve mutual fund disclosure by providing investors with key information in plain English in a clear and concise format, while enhancing the means of delivering more detailed information to investors.
Is a mutual fund required to comply with the form and rule amendments?
Every mutual fund will be required to include a summary section at the front of its statutory prospectus. However, the use of a Summary Prospectus to satisfy prospectus delivery obligations is not required.
What information is required in the summary section of a statutory prospectus?
The summary section of a statutory prospectus must consist of the following key information presented in the following order:
The summary information must be presented at the front of the statutory prospectus and must be written in plain English. This information should not be preceded with any information other than the cover page or table of contents.
What information is required in the Summary Prospectus?
If a mutual fund relies on rule 498 to use a Summary Prospectus in meeting its statutory prospectus delivery obligations, the information contained in the Summary Prospectus generally must be the same as the information contained in the summary section of the fund's statutory prospectus.
Are there page limits or other formatting requirements?
There is no page limit to the Summary Prospectus or summary section of the prospectus. However, the intent of the amendments is that mutual funds prepare a concise summary of key information, on the order of three or four pages.
Are multiple fund or multiple class summaries permitted?
What documents are required to be posted on the Internet by a mutual fund using a Summary Prospectus to satisfy its prospectus delivery obligations?
A mutual fund may satisfy its prospectus delivery obligations under the Federal securities laws by sending or giving a Summary Prospectus and posting the statutory prospectus and other information on the Internet. Specifically, the fund's current Summary Prospectus, statutory prospectus, statement of additional information ("SAI"), and most recent annual and semi-annual reports to shareholders are required to be accessible, free of charge, at a Web site address specified on the cover page or at the beginning of the Summary Prospectus.
What are the formatting requirements for materials posted on the Internet?
What are the obligations to deliver other documents in connection with the Summary Prospectus?
Rule 498 requires a fund to send, upon request, the statutory prospectus, SAI, and most recent annual and semi-annual shareholder report in paper or by e-mail within three business days at no cost to the requestor.
Can sales and other materials accompany the Summary Prospectus?
Can information be incorporated by reference into the Summary Prospectus?
What are the filing requirements for the Summary Prospectus?
A Summary Prospectus is required to be filed with the SEC through its Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") system no later than the date that it is first used. A Summary Prospectus that is filed on EDGAR will be publicly available; however, a fund may not rely on this availability to satisfy the requirements to post the document online.
What are the compliance dates for the amendments?
The effective date of the amendments is March 31, 2009.
All initial registration statements on Form N-1A, and all post-effective amendments that are either annual updates to effective registration statements, or that add a new series, filed on or after January 1, 2010, must comply with the amendments to Form N-1A.
The final compliance date for filing amendments to effective registration statements to comply with the new Form N-1A requirements is January 1, 2011.
A mutual fund may not rely on a Summary Prospectus and rule 498 to satisfy its prospectus delivery obligations until the fund's statutory prospectus includes a summary section that complies with the amendments to Form N-1A.
The adopting release for the amendments can be found on the SEC's Web site at http://www.sec.gov/rules/final/2009/33-8998.pdf.
Form N-1A and rule 498 can be accessed through the "Investment Management" section of the SEC's website at http://www.sec.gov/divisions/investment.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.