Tailored Shareholder Reports FAQs released: Binding individual shareholder reports of multiple funds addressed

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Overview

Learn more about the recently released TSR FAQs published by the SEC.

On Friday, January 19, 2024, SEC staff of the Division of Investment Management published “Frequently Asked Questions” related to Tailored Shareholder Reports.

As additional questions arise, the staff may update this information. The release of the FAQs is timely based on the upcoming compliance date of July 24, 2024. The responses represent the staff views of the Division of Investment Management and are not rules, regulations or statements of the Commission.

Although the Commission has neither approved nor disapproved the answers to these FAQs, they provide guidance for issues raised since the October 2022 adoption of the rule and form amendments.

Among the important issues addressed in the FAQs are:

  1. Appropriate broad-based securities market index
  2. Form N-CSR and website availability requirements
  3. Binding individual shareholder reports of multiple funds
  4. Electronically provided shareholder reports
  5. Compliance date and Inline XBRL issues

Of these issues, binding individual shareholder reports of multiple funds, will have the most issuer and investor benefit.

Binding individual shareholder reports of multiple funds

The permission for issuers to bind individual Tailored Shareholder Reports of multiple funds into a book provides a huge operational and cost benefit to issuers who choose to take advantage of the permissive guidance. The allowance also provides a better user experience for shareholder report recipients by minimizing the number of individual self-mailers and/or the number of documents inserted into an envelope. Client advocacy was viewed as an important element in our discussions with SEC staff.

Following precedent, the ability to print, bind, and self-mail a group of TSRs in one document is consistent with the mutual fund Summary Prospectus Rule 498 delivery model currently in place.

Unlike Rule 498, which provides the binding allowance for variable product underlying fund Summary Prospectus, the TSR binding allowance extends to TSRs for all fund types and is not specific to variable products. That said, the greatest application and benefit is in the variable product space.

Similar to the Summary Prospectus guideline the SEC suggests a fund should consider including a table of contents to any bound, stapled, or stitched shareholder reports for investors’ ease of use.

The benefits realized through cost savings, manufacturing, technology, and operational efficiencies align with the Commission’s goal to improve investor experience. In addition, following the Summary Prospectus delivery provides a consistent user experience.

Thank you to the Insured Retirement Institute (IRI) staff, specifically Emily Micale and Jason Berkowitz, for their collaboration and the channel to communicate the benefits of these updates to the SEC staff, as well as their continued efforts to push this important decision across the finish line. 

The FAQs can be found on the SEC’s website at the following URL: https://www.sec.gov/investment/tailored-shareholder-reports-faqs

 

 

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 .

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