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FYI: Significant Disclosure Guidance

FYI: Three significant items have been posted on the SEC’s website explaining certain disclosure requirements for BDs, IAs and funds:

1) A small entity compliance guide has been posted addressing requirements for BDs and IAs under newly adopted Form CRS. The guide provides a helpful summary highlighting the drafting, filing and updating requirements for the form. While it is a summary intended to assist small firms, the guide provides a helpful, succinct explanation of requirements applicable to all BDs and IAs using Form CRS.

Form CRS Relationship Summary and Amendments to Form ADV — A Small Entity Compliance Guide: https://www.sec.gov/info/smallbus/secg/form-crs-relationship-summary.

2) A small entity compliance guide has also been posted addressing requirements for BDs under Regulation Best Interest. This guide too is aimed at smaller firms, but contains a helpful summary of requirements applicable to all BDs subject to the new rule.

Regulation Best Interest — A Small Entity Compliance Guide: https://www.sec.gov/info/smallbus/secg/regulation-best-interest.

3) The Division of Investment Management also posted Accounting and Disclosure Information (ADI) 2019-08 on improving principal risks disclosure in mutual fund prospectuses. Observing that some fund prospectuses include risk disclosure that is overly lengthy and technical, the ADI lists several approaches the SEC staff has observed that may improve risk disclosure for investors, including:

  • Ordering risks by importance.
  • Tailoring risk disclosure for each fund in the fund group rather than relying on generic, standardized, risk disclosures across funds.
  • Disclosing where appropriate that a fund is not appropriate for certain investors.
  • Considering other approaches, including –
    • Keeping the summary concise and including more detailed risk disclosure elsewhere in the prospectus.
    • Placing non-principal risks in the SAI rather than the prospectus.
    • Periodically reviewing risk disclosures to make sure they remain adequate in light of fund characteristics and market conditions.

ADI 2019-08 Improving Principal Risks Disclosure: https://www.sec.gov/investment/accounting-and-disclosure-information/principal-risks/adi-2019-08-improving-principal-risks-disclosure.

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