The US Securities and Exchange Commission on August 5 proposed a new disclosure framework for mutual and exchange-traded funds that seeks to replace the current disclosure delivery framework—for annual prospectus updates and annual and semi-annual shareholder reports—with streamlined shareholder reports delivered semi-annually that contain simplified information in a user-friendly format.
As the Securities and Exchange Commission (SEC) noted in the Proposing Release, responses to its 2018 request for comment regarding retail investors’ experience with fund disclosures illustrated that “retail investors prefer concise, layered disclosure and feel overwhelmed by the volume of fund information they currently receive.” The proposal for the new delivery framework (the Proposal) is in line with the SEC’s overall investor experience initiative and its effort to modernize and consolidate fund reports delivered to shareholders.
- If adopted, mutual funds and exchange-traded funds (ETFs) would be required to prepare and deliver a streamlined shareholder report twice per year.
- Although traditional prospectuses would still have to be delivered for initial investments in funds shares, annually updated prospectuses and traditional shareholder reports would no longer have to be delivered, unless requested.
- Funds would be required to prepare summaries of fees and principal risks in a new, concise format, which would allow for more interactive, graphical and investor-friendly disclosures.
- The proposal would overrule the application of Rule 30e-3, which allows funds to start to rely on a “notice and access” model for shareholder report delivery as early as January 2021.
- Fund advertisements and sales literature would be required to present fees consistently with streamlined shareholder reports.
- Despite potentially significant short-term expenses associated with implementing the proposed framework and coordinating with fund service providers, over time funds and shareholders likely would benefit from substantially reduced printing and mailing expenses.
Under the Proposal, funds would be able to incorporate interactive and customizable information. Notably, the Proposal would not reduce the total amount or type of information available to investors. Rather, the proposed framework would use a new, layered approach to emphasize certain information that would allow a retail audience to assess and monitor fund investments, while also retaining traditional prospectuses and shareholder reports for review on the fund’s website. Fund investors would be able to request delivery of hard copy prospectuses and shareholder reports, free of charge.
In addition, the Proposal addresses the following:
- Existing prospectus disclosures relating to fees and expenses and principal risks would be amended to provide investors with more straightforward, consistent, and comprehensible information.
- Rule 30e-3 under the Investment Company Act of 1940 (1940 Act)—which generally permits, subject to certain conditions, investment companies to satisfy shareholder report delivery obligations by making reports available online and providing a paper notice of online availability in lieu of mailing the report to shareholders—would be narrowed to exclude open-end investment companies, which would instead send investors streamlined shareholder reports under the Proposal.
- Fund advertising rules would be amended to promote enhanced disclosure and transparency and more consistent fee and expense information in fund advertisements and sales literature.
Together, these proposed changes are intended to form a comprehensive disclosure regime that would provide investors with more concise, consistent and user-friendly information that will aid them in more easily and effectively evaluating fund investments.
TAILORED SHAREHOLDER REPORTS & PROPOSED DELIVERY REQUIREMENTS
New Disclosure Framework & Tailored Shareholder Reports. Rather than tinker around the edges of the existing disclosure framework and advocate incremental change, the SEC proposed a substantial overhaul of the disclosure framework and delivery requirements related to fund prospectuses and shareholder reports.
The SEC noted that annual shareholder reports and annual prospectus updates are typically delivered to shareholders close in time to one another (e.g., approximately two months apart), which can lead to redundancy and confusion. For example, the SEC considered the nature of these disclosure documents and their intended audiences (i.e., existing shareholders versus new investors) and questioned whether shareholders benefited from the receipt of the same type of information presented in different ways (e.g., fund performance and expenses).
The SEC noted that shareholder reports present backward-looking information about a fund’s actual ongoing expenses and performance based on a fund’s fiscal year, whereas a prospectus includes forward-looking information about fees as well as calendar year performance information. The latter information, the SEC argued, is more relevant to a new investor than an existing shareholder monitoring a fund investment.
Further still, the SEC remarked that certain disclosures contained in annual prospectus updates, such as principal investment strategies and principal risks, may be of little interest to existing shareholders because the disclosures either remain the same year-over-year or, in contrast, material changes to the disclosures may go unnoticed because they are not highlighted for shareholders in the annual prospectus update. The SEC also considered potential cost savings for funds and shareholders associated with the delivery of tailored shareholder reports and a modified disclosure framework, which would substantially reduce annual printing and mailing expenses.
In response, the SEC proposes replacing current prospectus and shareholder report delivery requirements with the delivery of abbreviated annual and semi-annual reports that would be visually engaging and tailored to highlight information of particular importance to retail investors, including fund expenses, performance, and portfolio holdings. The proposed changes would not impact the existing requirement that an investor receive a fund prospectus upon the investor’s initial purchase of fund shares. Thereafter, however, funds would not have to deliver annual prospectus updates to investors. Instead, the fund would deliver the proposed streamlined annual and semi-annual reports, whereas fund prospectuses and other information currently included in annual and semi-annual reports (including information filed with the SEC on a semi-annual basis on Form N-CSR) will be made available online, and delivered—free of charge in paper or electronic form—only upon request.
Funds would also be required to include a legend on the cover page of streamlined shareholder reports that directs investors to the websites where they can find more in-depth fund information. The streamlined shareholder reports would also describe any material changes to a fund’s prospectus.
Annual Shareholder Reports.Guidance specifying the design and content of funds’ streamlined annual and semi-annual shareholder reports would appear in the new Item 27A to Form N-1A and would replace all existing provisions in current Item 27 of Form N-1A that relate to shareholder reports.
Under the Proposal, certain information would be added to these reports whereas other information would be removed and/or moved to Form N-CSR. For example, new sections describing fund statistics (e.g., net assets, total number of portfolio holdings and portfolio turnover rate) and certain material fund changes that have occurred since the beginning of the reporting period or that the fund plans to make in connection with its annual prospectus update would be added to each report. Specifically, a fund would be required to briefly describe a material change to any of the following items: the fund’s name; investment objective or goals; increase in fund ongoing annual fees, transaction fees, or maximum account fee; principal investment strategies; principal risks; investment adviser and/or sub-adviser; and portfolio manager(s).
In addition, the following items currently found in a traditional annual report would be moved to Form N-CSR and made available online and only delivered (in paper or electronic format) upon request:
- Financial statements, including a fund’s schedule of investments
- Financial highlights (with certain data points retained in the annual report)
- Results of shareholder voting during the period
- Director and officer remuneration
- Statements regarding the basis for a board’s approval of advisory contracts
- Rule 30e-3 disclosure, if applicable
Other information currently found in traditional shareholder reports would be part of the streamlined shareholder report (e.g., graphical representation of fund holdings) but certain remaining information would be revised and scaled back into a more concise form (e.g., expense examples, management’s discussion of fund performance, and liquidity risk management disclosure).
- Expense Examples: With respect to the expense example, the SEC proposed replacing the two current $1,000 expense examples based on actual returns and hypothetical returns with a single simplified $10,000 expense example based on actual returns that disaggregates the fund’s total return and costs paid during the period. Expenses would be presented as both a dollar amount and a percentage of the shareholder’s investment in the fund.
The Proposal also calls for the inclusion of certain ETF-specific expense example disclosures—one based on an ETF’s net asset value return and one based on its market value return. In addition, the current narrative preamble to the expense examples would be deleted in its entirety and replaced by brief footnotes to the new expense example table.
- Management’s Discussion of Fund Performance: After a review of current disclosures of management’s discussion of fund performance, the SEC staff noted that many funds provide overly long narrative discussions. In response, the SEC proposed to specify that management’s discussion of fund performance must briefly summarize the key factors that materially affected the fund’s performance during the last fiscal year, including the relevant market conditions and the investment strategies and techniques used by the fund’s investment adviser.
As for amendments to management’s discussion of fund performance, given that the delivery of streamlined shareholder reports would replace the delivery of new prospectuses, the SEC proposed adding to the disclosure of management’s discussion of fund performance certain information that currently appears in a fund’s prospectus, including average annual total returns (with and without sales charges), class-specific performance and average annual total returns of relevant benchmarks.
The Proposal would also amend the definition of an “appropriate broad-based securities market index” to clarify that the term refers to an index that tracks the overall applicable domestic or international equity or debt securities market, rather than a more narrowly based index. In addition, to the extent a fund provides updated performance information on its website, the SEC proposed that funds provide instructions in the streamlined shareholder report as to where investors can find this information and provide a means to facilitate investor access to that information, such as a hyperlink or Quick Response Code (QR Code). As a result of the amendment to the definition of “appropriate broad-based securities market index,” funds may have to give fresh consideration as to the appropriateness of their benchmark indexes.
- Liquidity Risk Management Disclosure: Under the Proposal, the SEC would replace the current discussion of the operation and effectiveness of a fund’s liquidity risk management program with a brief summary of the (1) key factors or market events affecting the fund’s program during the reporting period, (2) key features of the program, and (3) effectiveness of the program over the past year.
In addition, the Proposal would ask funds to tailor this disclosure to each fund rather than rely on generic, standard disclosure applicable to all funds. As proposed, the liquidity risk management disclosure could result in significantly more work for fund complexes in drafting tailored liquidity risk management program disclosure, particularly for fund complexes with a large number of funds that span multiple asset classes, and even more so during years of unusual market circumstances that affected liquidity.
The SEC also proposes that each fund prepare its own report, separate from the reports of other funds in the same fund family or trust. The SEC asserted that multi-series shareholder reports impede a shareholder’s ability to assess and monitor ongoing investments and are thus inconsistent with the stated goals and purposes of the Proposal. Funds with separate asset class investments within a single fund, however, would not be required to produce separate reports for each asset class. This is similar to the current general requirement that fund families present summary information separately for each fund in a multiple fund prospectus. Many fund families or trusts with multiple funds currently file a combined shareholder report for funds that have the same fiscal year end. As such, if adopted as proposed, this aspect of the Proposal is a deviation from common practice and something fund providers will need to think about in preparing to comply with the final rule.
Item 27A of Form N-1A would also prohibit the inclusion of additional information outside the parameters of Item 27A in the report itself (e.g., a fund may not incorporate by references information that is located in another disclosure document in order to satisfy the content requirements of an annual report). The Proposal, however, would allow for the transmission of certain additional materials with the annual report, such as a shareholder letter outlining management’s philosophy or providing an investment outlook, so long as the report is given greater prominence. The Proposal would not set a word or page limit on the length of a fund’s annual report, but the SEC suggested that most funds should be able to reduce the length of their annual reports to three or four pages. The Proposal included a three-page hypothetical annual report for illustrative purposes.
Item 27A would also include instructions that address the electronic presentation of shareholder reports that appear online or on mobile devices. The Proposal would require funds to use “plain English” principles in their annual reports, implement design features that make reports “easy to read,” and present information in the same order that it appears in Item 27A. In addition, the Proposal would encourage funds to present certain information using question-and-answer formats, charts, graphs, tables, bullet lists, and other graphics or text features that help provide context for information being presented. The SEC also seeks to provide greater flexibility to funds that want to use interactive, user-friendly design features when they deliver electronic reports to shareholders, and to use online tools (e.g., video or audio messages, mouse-over windows, pop-up definitions, chat functionality, and expense calculators) designed to enhance investor understanding of these reports.
Semi-Annual Shareholder Reports. In general, the changes proposed with respect to annual shareholder reports would also apply to semi-annual shareholder reports. Consistent with current requirements, however, the Proposal would not require funds to include management’s discussion of fund performance in semi-annual reports, though funds could include this disclosure in semi-annual reports on an optional basis. In addition, funds would not be required to include a discussion of material changes in their semi-annual reports, but the Proposal would permit funds to do so. And, although the SEC does not propose an alternative approach to the delivery of semi-annual reports in the Proposal, the SEC requested comment on potential disclosure alternatives to direct transmission.
New Form N-CSR & Website Availability Requirements.The Proposal calls for information that is currently presented in shareholder reports, but is less retail-focused, to be moved to Form N-CSR. Accordingly, the SEC proposed corresponding amendments to Form N-CSR and Rule 30e-1 under the 1940 Act. Proposed changes would also ensure that funds make available on their website, and deliver upon request and at no cost, all information being moved from the shareholder reports to Form N-CSR.
Proposed Rule 498B & Treatment of Annual Prospectus Updates.As noted above, the SEC proposed replacing annual prospectus updates with the proposed fund-specific streamlined shareholder reports. Adding to this, proposed Rule 498B would address fund obligations with respect to shareholders’ continued receipt of annual prospectus updates, to the extent a fund delivers its annual update prospectus to shareholders, through the delivery of streamlined shareholder reports.
Under the proposed rule, investors would continue to receive a prospectus when they make their initial fund investment, but they would no longer receive either (1) an updated prospectus each year they remain an investor in the fund or (2) a prospectus in response to each purchase of a fund’s shares, depending on the prospectus delivery practices of the particular fund group. Instead, summary and statutory prospectuses would be available online (and must be delivered free of charge upon request). Further, investors will receive timely notifications of certain material changes when they occur throughout the course of the year, unless such changes have already been disclosed in the fund’s most recent annual report to shareholders.
Rule 498B would also include additional conditions regarding the format of documents presented on a fund’s website. For example, documents made available online under Rule 498B would need to be presented in a format that is convenient for both reading online and printing on paper. The SEC also noted that the amended delivery requirements would not relieve funds of any legal responsibility for misleading disclosure contained in their prospectuses. We note that, as proposed, reliance on Rule 498B is voluntary, but compliance with the rule’s conditions is mandatory for funds relying on the rule.
NARROWING SCOPE OF RULE 30E-3
Under the 1940 Act, all registered funds and registered unit investment trusts are required to provide annual and semi-annual reports to their investors. Rule 30e-3—adopted approximately two years ago—allows these entities to instead use the “Notice and Access” method to fulfill such requirements by providing their investors a short, hard copy notice that, among other things, directs investors to a free, public website where the reports may be accessed. Funds may begin relying on Rule 30e-3 on a rolling basis depending on their fiscal years, but starting as early as January 1, 2021, provided they have otherwise met the conditions of the rule.
Many fund complexes have been implementing procedures to begin relying on Rule 30e-3 with respect to shareholder reports given the potential for substantial reductions on printing and mailing expenses borne by the funds as a result. Because the streamlined shareholder reports are intended to become the primary source of fund disclosure for investors, the SEC proposed that most open-end investment companies (e.g., mutual funds and ETFs) be excluded from the scope of Rule 30e-3 so that all such funds’ investors will fully benefit from the proposed layered disclosure framework.
The timing of this element of the Proposal is somewhat awkward given that the first date of possible reliance on Rule 30e-3 will precede any adoption of a final rule on streamlined shareholder reports, such that funds that wish to rely on Rule 30e-3 would have only a limited time to benefit from the substantial steps already taken (and costs incurred) to rely on the rule. Assuming that the Proposal is adopted as proposed, mutual funds and ETFs would have made efforts and operational changes that would become obsolete in short order.
Nonetheless, given the potential for a protracted comment period for such a substantial proposal, and the temporal proximity to potential changes in government leadership, funds preparing to rely on Rule 30e-3 in 2021 almost certainly will proceed with those plans, and will benefit from them in the form of reduced fees and expenses, albeit perhaps not as long-term as expected.
MODIFICATIONS TO PROSPECTUS DISCLOSURES: FEES, EXPENSES & PRINCIPAL RISKS
The SEC also proposes to modify existing prospectus disclosures of fees, expenses, and risks to better meet the information needs of investors. In particular, the SEC proposes revisions to Item 3 of Form N-1A to replace the current fee table in the summary section of the prospectus with a simplified “fee summary” that uses more “plain English” terms to describe fees and more clearly sets forth an investor’s total costs of investing in a fund.
The fee summary would include the following:
- A narrative statement that (1) the fee summary shows costs to an investor of buying, holding, and selling shares of the fund; (2) these costs reduce the value of the investor’s investment in the fund; and (3) the investor may pay other fees not presented in the fee summary.
- A summary fee table with two sections: (1) a table showing, both as a percentage of assets and in dollars (assuming a $10,000 investment), the fund’s transaction fees (such as purchase charges and/or exit charges), any maximum account fee and the total, “bottom line” amount of ongoing annual fees (including fixed fees, such as management fees, and certain performance fees) borne by the fund; and (2) a simplified version of the existing example disclosure that includes a shorter narrative and only two time periods (1 year and 10 years, or, for new funds, 1 year and 3 years).
- Abridged portfolio turnover disclosure immediately after the summary fee table.
Under the Proposal, the current fee table in the prospectus would be moved to the statutory section of the prospectus, thereby retaining in the prospectus more detailed information for those investors for whom it is relevant. The SEC also proposed that funds that invest 10% or less of their total assets in other investment companies and certain private funds not be required to include in the fee table the fund’s acquired fund fees and expenses (AFFE), whereas funds that invest more than 10% of their total assets in other investment companies and certain private funds must include the amount of the fund’s AFFE and a statement that the fund’s total ongoing annual fees in the table and fee summary would be higher if these fees and expenses were included.
In an effort to rein in the excessive length and obfuscation of risk disclosures in the summary prospectus, the SEC also proposes that
- disclosure of non-principal risks be prohibited in the summary prospectus;
- any principal risks included in the summary prospectus be “briefly” described;
- principal risks be ordered by importance, with the most significant risks appearing first; and
- summary prospectus risk disclosure be specifically tailored to both how a fund actually operates and the investments actually held by the fund.
Finally, the SEC is proposing three new instructions to Item 9(c) of Form N-1A relating to principal risk disclosure in the statutory prospectus, as follows:
- To determine whether a risk is a principal risk, a fund would consider whether the risk would place more than 10% of the fund’s assets at risk and whether it is reasonably likely that the risk will meet this 10% standard in the future.
- Fund-of-funds would not be permitted to include a risk of an acquired fund unless it is a principal risk of the acquired fund.
- Where a fund’s manager has discretion to invest in different types of assets, principal risk disclosure would be required to explicitly state that an investor may not know how the fund will invest in the future and the associated risks.
In general, the SEC staff has been focused on getting funds to streamline risk disclosure so that it is more focused on the actual risks of a particular fund and not muddled by irrelevant “noise.” The staff’s focus on the ordering of risks in terms of relevance to a fund has been part of this same general initiative, particularly through the disclosure review and comment process on new fund filings and material change filings made under Rule 485(a). As proposed, these somewhat more concrete guidelines as to what constitutes a “principal” risk could be helpful to the fund industry in trying to meet the SEC staff’s request to hone in on what is most meaningful to shareholders.
AMENDMENTS TO THE INVESTMENT COMPANY ADVERTISING RULES
In response to developments in fund advertising, the SEC proposed amendments to the investment company advertising rules under the Securities Act of 1933 (1933 Act) and the 1940 Act to more clearly and accurately present the costs associated with investing in funds. In particular, the proposed amendments would require investment company advertisements and sales literature that include fees and expenses to provide prominent information about the fund’s maximum sales load (or any other nonrecurring fee) and gross total annual expenses, in each case, based on the computation methods prescribed for such figures in the fund’s prospectus.
The proposed amendments would also require that, where total annual expenses are presented net of a fee waiver or expense reimbursement arrangement, information also be included about how long the arrangement will remain in place and a statement that it may be terminated at any time. The proposed amendments would also require that fee and expense information included in fund advertisements and sales literature be reasonably current.
To address the concern that fund advertisements and sales literature may present fees and expenses in a way that misleads investors into thinking that the costs of investing in a fund are lower than they actually are, the SEC also proposed that when an investment company considers whether a particular statement of material fact could be misleading under Rule 156 under the 1940 Act, the investment company should consider whether its representation of fund fees and expenses may be misleading because of statements or omissions involving a material fact. For instance, a fund should consider whether an omission of an explanation, qualification, or limitation might render the portrayal of the fund’s fees and expenses misleading. The SEC noted that to avoid materially misleading statements, “it would be appropriate for funds to avoid using lengthy and technical disclaimers in small font sizes.”
To call the Proposal “substantial” would be an understatement. The Proposing Release itself is 646 pages long and includes 293 different requests (many of which have sub-parts) for market input on the various elements being proposed.
Comments on the Proposal will be due 60 days after publication in the Federal Register. We suspect that the SEC will receive an abundance of comments on the Proposal from a variety of different stakeholders, which will take a significant amount of time to process and consider.
IMPLICATIONS FOR STAKEHOLDERS IF PROPOSAL ADOPTED
Although the information underlying the various proposed new disclosure formats is largely consistent with what fund complexes prepare and disclose now, the packaging and distribution of that information would be fundamentally altered:
- Fund investors and financial intermediaries that sell funds and/or invest in funds on behalf of clients would have substantially different information on which to consider, compare, and monitor fund investments. Funds themselves would have to modify processes for creating, presenting, confirming, and updating content, which would require new ways of connecting with fund operations and administrators, transfer agents, and marketing teams. Internal marketing teams would have new opportunities to design more interactive, summary information for use with investors.
- Fund legal and compliance teams would be required, working with portfolio managers and fund operations, to make a determination as to the “principal” status of risks and how to design meaningful disclosure, and may decide to negotiate new, or amend existing, vendor contracts to cover changes to the scope of services. Fund administrators and internal fund accounting teams would have to design systems to prepare, test, and confirm data for modified summary fee table disclosures.
- Fund fulfillment and investor relations teams would need to design processes to address customer questions and complaints in response to the substantial changes in information they receive, and also to deliver hard copy materials upon request.
- Despite all of these short-term adjustments and considerations, the ability for a fund to deliver streamlined shareholder reports (either in paper or electronically) in lieu of bulky hard copies of full prospectuses and traditional shareholder reports should, in the long-run, substantially reduce the cost to funds (and therefore shareholders) of printing and mailing materials, and make for an improved investor experience.
In short, the Proposal, if adopted, would be the most significant shift in the modernization of the registered funds marketplace in years, with an abundance of long-term potential upside but also a range of costs and potential pitfalls in the short-term.
 We note that annual prospectus updates are not required to be delivered to shareholders. Section 5(b)(2) of the 1933 Act, in practice, requires that a prospectus be delivered to each purchaser of shares no later than the time a confirmation of his or her initial purchase of fund shares is delivered. Because a fund’s prospectus is normally updated annually, some procedure must be established to ensure that an effective updated prospectus is in the hands of existing fund shareholders before they purchase additional shares. Rather than bearing the expense of sending a prospectus with each confirmation of a shareholder’s purchase of additional shares, most fund groups elect to send copies of the fund’s new prospectus to all shareholders each time it is updated.
 Specifically, under Proposed Rule 498B, unless a material change is disclosed in a fund’s most recent annual report to shareholders, a fund must alert existing shareholders of any material change with respect to any of the following items: (1) fund name; (2) investment objectives or goals; (3) material increases in the fund’s ongoing annual fees, transaction fees, or maximum account fee; (4) principal investment strategies; (5) principal risks; (6) investment adviser(s); and (7) portfolio managers. The Proposal does not specify the form of notice a fund must provide, so a fund could satisfy this requirement by filing and sending existing shareholders either a post-effective amendment to its prospectus or a prospectus supplement. In either case, the fund (or a financial intermediary through which shares of the fund may be purchased or sold) must provide notice to existing shareholders within three business days of either the effective date of the fund’s post-effective amendment filing or the filing date of the prospectus supplement filing, by first-class mail or other means designed to ensure equally prompt receipt.
 Under Rule 30e-3, funds must accommodate an investor who chooses to continue to receive hard copy reports.
 Closed-end funds, unit investment trusts, and managed open-end investment companies not registered on Form N-1A would still be able choose to rely on Rule 30e-3.
 We note, however, that the SEC is somewhat insulated from changes in government leadership because it is an independent agency of the United States federal government, meaning that, unlike government agencies headed by a Cabinet secretary, the SEC does not report to a higher official within the executive branch. It is also worth noting that, subject to voluntary Commissioner departures, the Proposal would have the requisite support to be adopted as a final rule in its current form until at least June 2022, based on the unanimous approval of the Proposal and the current term expirations of the Commissioners. (Commissioners also may serve up to 18 months beyond the expiration of their terms.)
 The SEC seeks comment on what types of performance fees, including underlying fund fees—or “AFFE”—and securities lending costs, should be included in the calculation of this line item.
 To the extent that the fund’s full fee table includes an expense reimbursement or fee waiver arrangement, an additional line item would be permitted in the summary fee table to reflect the amount of ongoing annual fees after any such discount.
 The SEC also noted that this more concise portfolio turnover information should also follow the full fee table in the statutory prospectus.
 The SEC also proposed technical amendments to change the manner in which a fund that has been in operation for less than one full year calculates AFFE and to permit funds to explain in a footnote to the table that total ongoing annual fees presented in the table do not correlate to the expense presentation in the fund’s shareholder reports.
 This proposed revision would dictate that a fund may use “any reasonable means of determining the significance of risks.”
 See Dalia Blass, Keynote Address – Investment Company Institute Securities Law Developments Conference (noting that an area for improvement in fund disclosure is in its presentation of risk factors because SEC staff members who review fund filings often see risks ordered alphabetically instead of in order of importance).
 See Rules 156, 433, and 482 under the 1933 Act and Rule 34b-1 under the 1940 Act.
 The amendments would be applicable to all investment companies subject to the SEC’s investment company advertising rules, including mutual funds, exchange-traded funds, registered closed-end funds and business development companies.
 More specifically, such information should be at least as current as of the date of the fund’s most recent prospectus, or, where the fund no longer has an effective registration statement under the 1933 Act, as of its most recent annual report.