SEC modernizes investor communication with Tailored Shareholder Reports (including iXBRL)

3 minute read
SEC introduces Tailored Shareholder Reports (including iXBRL) to modernize investor communication


On October 26, 2022, by a vote of 5-0, the SEC adopted amendments to the requirements for Annual Report and Semi-Annual shareholder reports provided by Mutual Funds and Exchange-Traded Funds (ETFs) to highlight key information for investors.

Any time the SEC updates communication rules to protect shareholders, compliance is critical to avoid penalties. Following the SEC’s adopted amendments in October 2022, the big news for fund providers was delivered in three items that were added or changed from the proposed rule and appear in the final adopted rule.

  1. The introduction of an Inline XBRL (iXBRL) tagging for Open-End Fund annual and semi-annual reports
  2. The requirement to create individual reports by share class
  3. The continuation of the Fund Summary Prospectus printing and distribution

Timing: The rule went into effect 60 days after publication in the Federal Register, with an 18-month transition period after the effective date to allow Open-End funds time to adjust their shareholder reports and comply with changes to Rule 30e-3.

After the announcement of the final rule, the SEC posted a Fact Sheet to provide highlights of the rule.

Tailored communications with reports rule highlights

  1. Shareholder reports tailored to the needs of retail shareholders
  2. The rule provides for the preparation and delivery to shareholders concise and “visually engaging” Annual and Semi-Annual Reports that highlight important information, with a simplified expense presentation, for retail shareholders to assess and monitor their fund investments on an ongoing basis
  3. The rule amendments facilitate funds’ ability to make online versions of the shareholder reports more interactive and user-friendly
  4. Open-End funds will be required to tag the information in the shareholder reports using Inline XBRL (iXBRL) structured data language to allow for easier comparison across funds
  5. The removal of availability of Rule 30e-3. The amendments exclude Open-End funds from Rule 30e-3 to help ensure that all Open-End fund investors will experience the benefits of the new tailored shareholder reports
  6. Shareholders will directly receive the new tailored Annual and Semi-Annual Reports in paper (or electronically, if the shareholder has elected electronic distribution)
  7. The final rule amendments will not affect the availability of Rule 30e-3 for Closed-End Funds and management companies that offer variable annuity contracts
  8. The rule requires a layered disclosure framework for website document availability
  9. Much of the content in the current Annual Report and Semi-Annual Report will be moved to the N-CSR in Items 7 to 11 as this information may be more relevant to investors and financial professionals who desire more in-depth information
  10. This information also must be delivered free of charge upon request and filed on a semi-annual basis on Form N-CSR
  11. This information includes, among other items, full financial statements (including the schedule of investments) and financial highlights
  12. The tailored shareholder report must link directly to the additional information, or to a page where the information may be accessed with a single click

Additional information from the SEC impacting investor communication

  • In a change from the proposed rule, only one class in a multi-class fund can be included in each tailored shareholder report: each share class will require its own report
  • Investors can request the additional information that has been removed from the current shareholder report structure
  • Only the tailored shareholder reports will be required to be Inline XBRL tagged. The balance of the N-CSR will not be required to be tagged
  • Summary Prospectus – In another change from the proposal, fund Summary Prospectuses will still be printed and distributed as they currently are
  • The proposal would have eliminated the “Prospectus” mailing cycle; combining Prospectus delivery with the tailored shareholder report

Tailored investor reports with communications that are SEC compliant

Should you have questions about the new requirements for Tailored Shareholder Reports, including iXBRL compliance for Open-End Funds, or simply want to speak with a Toppan Merrill expert about compliance with the 1940 Securities Act, connect with us. You can also email [email protected] or call 800.688.4400. 

Guy Stanzione - Director, SEC Compliance Services

Guy Stanzione provides deep insight on the Securities Act of 1933, the Investment Company Act of 1940 and SEC regulatory compliance, as well as investment company solutions for regulatory document preparation, filing and distribution including Tailored Shareholder Reports. Leveraging more than 40 years of financial services, shareholder communication, printing and compliance service expertise he is a vital resource for financial services professionals navigating the complexities and pace of SEC regulatory changes .

Guy Stanzione - Director, SEC Compliance Services's Photo

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