SEC Votes to Make Funds, ETFs Simplify Their Fee Disclosures

What You Need to Know

  • The final rule standardizes the presentation of fees and expenses and encourages the use of graphics.
  • The rule makes it harder for funds to say they have no expenses while concealing costs to investors, Commissioner Caroline Crenshaw says.

The Securities and Exchange Commission voted Wednesday to require mutual fund and exchange-traded funds to provide concise, tailored shareholder reports that highlight fund expenses, performance and portfolio holdings.

The agency voted to require mutual funds and ETFs to transmit “concise and visually engaging shareholder reports and to promote transparent and balanced presentations of fees and expenses in investment company advertisements.”

SEC Chairman Gary Gensler said that shareholder reports “are amongst the most important documents that fund investors receive. These reports, however, often are more than 100 pages in length. As a result, a retail investor looking to understand the performance, fees, and other operations of a mutual fund or exchange-traded fund may need to sift through extensive financial information.”

The final rules “will require fund companies to share a concise set of materials that get to the heart of the matter,” Gensler added. “I am pleased to support these final rules because they will help investors better understand fund disclosures and help ensure that the information investors receive in investment company advertisements is transparent and balanced.”

SEC Commissioner Caroline Crenshaw, a Democrat, added that with the rule the “presentation of investment company fees and expenses in advertisements and sales literature [will] be standardized, consistent with the relevant prospectus fee table, and be reasonably current.”

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