Securities and Exchange Commission Tailored Shareholder Reports

This past Friday, the SEC staff issued a set of responses to FAQs on the Tailored Shareholder Reports (TSRs) Rule. While these responses only represent the views of the staff of the Division of Investment Management and have no legal force or effect, they provide welcome clarity and guidance on certain elements of the Rule that had been the subject of discussion across the industry.

As a reminder, the compliance date for implementation of the Rule is just six months away. The new requirements will apply to all open-end mutual fund and exchange-traded fund annual and semi-annual shareholder reports transmitted to shareholders on or after July 24, 2024.

Key Takeaways

• Indexes focused on emerging markets or developed markets or geographic regions such as Asia or Europe could qualify as an appropriate Broad-Based Securities Market Index (BBSMI).
• An index representing the national municipal securities market could qualify as a BBSMI, but an index representing the municipal securities market of a single state would not.
• Certain information to be included in Form N-CSR and on the fund’s website (i.e., Items 7-11) may be grouped by series and/or type of materials, and need not be presented individually by share class, so long as it:
  • effectively communicates the information;
  • clearly distinguishes the materials and/or series; and
  • provides a means of easily locating information (i.e., table of contents or hyperlinks).
• Posting required Form N-CSR information online will not violate Rule 502(c) of Regulation D, so long as the website does not generally solicit or advertise the securities.
• Multiple TSRs may be bound, stapled or stitched together for an investor in multiple funds or share classes.
• The FAQs also provide guidance on variable contract issuers’ transmission of underlying fund information, iXBRL, timing of compliance dates, and e-delivery of shareholder reports.