Investment Services Regulatory Update - September 2019

New Rules, Proposed Rules, Guidance and Alerts -


SEC Staff Issues Guidance on Improving Fund Principal Risks Disclosure -

On September 9, 2019, the Disclosure Review and Accounting Office staff in the SEC’s Division of Investment Management issued recommendations to mutual funds regarding certain disclosure practices intended to improve principal risk disclosures for the benefit of fund investors. The staff’s guidance was issued as Accounting and Disclosure Information (ADI) 2019-08 – Improving Principal Risks Disclosure.

The ADI includes three primary recommendations:

- Order Risks by Importance. To better highlight for investors the fund risks that they should consider most carefully, the staff “strongly encourage[s]” all funds to list their principal risks in order of importance, rather than alphabetically. In the staff’s view, an alphabetical listing of risk disclosures could obscure the importance of key risks and, “[i]n some extreme cases,” could render the disclosure potentially misleading. The staff acknowledged that ordering risks based on importance requires subjective determinations that funds are best positioned to make. Importantly, the staff said that it “would not generally expect to comment on a fund’s ordering of risks by importance.”

Please see full Update below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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