Top 3 things to know about the Tailored Shareholder Reports Rule

5 minute read
Top 3 things to know about the Tailored Shareholder Reports Rule


The SEC has been focusing on digitally transforming and modernizing all aspects of fund operations for many years. Changes like the new Tailored Shareholder Reports requirement will make fund costs and performance more transparent and easier to understand. 

For more than a decade, the SEC has been focused on a digital transformation to modernize systems and reporting to make publicly disseminated data easier to consume, and the presentation of filed reports easier for investors to comprehend. To accomplish this, the SEC has adopted rules to transform filings, information access and most recently changes to financial reporting.

In October 2022, the SEC voted unanimously to approve one of the most impactful changes in ‘40 Act regulations with the introduction of the new Tailored Shareholder Reports (TSR) for investment companies. Mandated by the SEC and effective in January 2023, with a compliance date of July 24, 2024, all mutual funds and ETFs filing under Form N-1A are required to produce a new 2 to 4-page tailored shareholder report designed to increase the transparency of fund expenses and performance for shareholders. The report must be created at the individual share class level, featuring information common to all share classes within a fund and variable content related to the investor share class. The report must be iXBRL tagged and filed with the SEC as part of the filer’s Form N-CSR. Similar to mutual fund Summary Prospectuses (Rule 498), unless the investor has previously consented to electronic delivery, these reports must be mailed to investors, with additional information available online and in paper format upon request.

While the requirements may seem straightforward, filers should not underestimate the changes necessary to existing workflows to gather the content to produce the report, iXBRL tag, file and distribute the new reports. With the creation of the documents by share class, the changes to house holding delivery guidelines have to be considered.

Change #1: Concise and visually engaging reports

The rule requires a concise and visually engaging report. What exactly does that mean? Tailored reports must be created by share class, with summary fund and share class information pertinent to that shareholder. Additional, more detailed fund-level information, such as financial statements, schedules of investment and financial highlights will be moved to the N-CSR and available online. The 2 to 4-page streamlined reports are structured to present only salient fund costs and performance information. Each shareholder must receive the TSR by mail unless previously consented to receive electronic delivery. 

The shareholder report design template and readability are also being changed. The SEC is eliminating the long, hard-to-understand content, moving to easy-to-consume, information at-a-glance. 

To prepare for this change, familiarize yourself with the required content and presentation standards as well as determine the number of funds and share classes you will need to produce. Fund companies must plan for added review required to approve the iXBRL tagging. 

Change #2: Structured content and formatting changes

Although presented in a completely different format, more like a Fact Sheet than a financial report, much of the required content for the TSR currently exists. The new format will introduce workflow changes to “map” how the content will be created for the new format. Identifying the currently existing content and incorporating it with new content for the report needs to be part of your implementation planning. Once you have “assembled” the information for the rule-compliant report, the next step is understanding how to apply the new iXBRL requirements. Although still in draft form, the SEC has released the Open-End Fund (OEF) taxonomy, which will be applied to the new TSR, as well as Risk Return Summary tagging.

If you are not already using iXBRL, it is imperative to become familiar with the requirement, as the SEC will have mandated tagging of the required content prior to EDGAR filing. There is a list of approved tags in the “draft” OEF  taxonomy and you must work through the list of tags to determine which tags are to be applied to your TSR data points and content. This can be a difficult task, depending on the number of share classes, size and complexity of your fund. Seeking expertise in the initial XBRL mapping and tagging is recommended to avoid errors and ensure SEC compliance.

Additionally, keep in mind that TSRs will have variable fields. If you are using report generation software, verify that it can handle creating automated reports for each shareholder class. Without the automated capabilities, your process will be difficult, time-consuming and error-prone.

Change #3: Website hosting requirements

The SEC is introducing a layered disclosure framework, much like the one introduced for the Summary Prospectus (Rule 498) approach to the disclosure of portfolio holdings, where a graphical representation of holdings continues to appear in the shareholder report, and more detailed and current portfolio holdings information, which currently appears in the shareholder report, is available online and available upon request. Investors must be able to access their relevant fund information within a minimum number of mouse rule clicks, similar to that of the Summary Prospectus 2-click requirement. Every share class within each fund will produce an annual report and semi-annual report, which along with more detailed disclosure, must be displayed on a website.

For a fund complex with 20 funds, each with five share classes, the number of documents on a website increases substantially, considering each tailored shareholder report and the corresponding detailed disclosure, keeping user experience for site navigation in mind.  

Simple steps to approaching the TSR rules changes

Much of the current focus has been on the visual presentation of the first iteration of TSR creation. While important, that focus has meant that few are thinking about the other critical, and required, components of the rule including website hosting and iXBRL tagging. The best course of action is to:

  1. Familiarize yourself with the new report requirements and assemble the shareholder class-specific information you need for each TSR.
  2. Get ahead of the planning for the required iXBRL tagging and ensure you have iXBRL resources secured.
  3. Understand the changes to Form N-CSR.  
  4. Understand the OEF Taxonomy and the impact on TSR and Risk Return.
  5. Understand the requirements of ADA document and website remediation (where applicable).
  6. Determine the website impact of the required hosting and ensure you have resources dedicated to the development – or utilize a plug-and-play solution.

Where to go if you have questions

Toppan Merrill continues to carefully follow the SEC modernization changes. We have simple and straightforward platform solutions to help you manage the SEC-tailored shareholder report requirements from end to end.

If you have any questions about tailored shareholder reports, SEC filings, client communications systems or other matters concerning The Securities Act of 1940, the experts at Toppan Merrill can help. Visit, connect with us at [email protected] or call us at 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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