The U.S. Securities and Exchange Commission (SEC) approved a new rule allowing for mutual fund, exchange-traded fund (ETF) and other investment fund shareholder reports to be delivered electronically. Effective January 1, 2021, fund companies will be able to notify shareholders when new reports have been posted to their websites. This is a change from the current system where annual reports are sent through postal mail.

Under the new rule, a fund can make its reports and other required materials accessible on a website. Shareholders will receive a paper notice alerting them to the release of these reports, with instructions on where to find them.

Those of you who prefer the reports in paper format will continue to have this option. Under SEC rule 30e-3, investors can “elect to receive all future reports in paper that are sent by the fund complex or forwarded by the financial intermediary, or request to receive particular reports in paper on an ad-hoc basis.” These reports must be sent free of charge.

Investors will also have the option to change their preferences. If a fund shareholder opts for, say, electronic delivery and later decides that they prefer to have the reports sent to them via postal mail, they can do so (and vice versa). An election to receive reports in paper for one fund will apply to all other funds the investor currently owns (or in the future will own) from the same fund family or through the same intermediary.

A two-year transition period is being instituted as part of the rule. During this time, fund companies will be required to notify investors about the change.

As part of its announcement about the new rule, the SEC is also requesting feedback regarding fund disclosure. The SEC wants to know whether fund information is being presented in a way that individual investors find useful. The SEC also wants to know how to make disclosures more interactive and personalized. More information about the project and a form to leave feedback are at www.sec.gov/tell-us. Feedback will be solicited through October 31, 2018.

Source: “SEC Modernizes the Delivery of Fund Reports and Seeks Public Feedback on Improving Fund Disclosure,” Securities and Exchange Commission Press Release 2018-103, June 5, 2018.