Summary of Online Posting Requirements
Summary Prospectuses
Since 2010, Mutual Funds and ETFs have been able to use a Summary Prospectus to meet prospectus delivery requirements. Beginning in 2020, variable products offered by insurance companies have been able to use Summary Prospectuses under substantially similar rules.
Under the Summary Prospectus rules, in addition to preparing, filing, and delivering Summary Prospectuses to investors, registrants are required to provide certain online disclosures and, in some cases, design their online disclosure documents in a way that facilitates investors’ electronic access to more detailed information about their investments.
Required Online Documents
Under the Summary Prospectus rules, registrants using a Summary Prospectus must post certain documents online at the website address specified on the cover page of the Summary Prospectus, on or before the company relying on the rule provides the Summary Prospectus to investors:
- Open-End Funds: Open-end funds using a Summary Prospectus are required to post the fund’s current Summary Prospectus, Statutory Prospectus, Statement of Additional Information (SAI), and most recent annual and semi-annual reports to shareholders.
- Variable Products: An insurance company is required to post a variable product’s current Initial Summary Prospectus (ISP), Updating Summary Prospectus (USP), Statutory Prospectus, SAI, and, in the case of a registrant on Form N-3, the most recent annual and semi-annual reports to shareholders.
In addition, if an insurance company avails itself of the optional method of delivering underlying fund prospectuses, the insurance company must post, for each underlying fund, the fund’s current Summary Prospectus, Statutory Prospectus, SAI, and most recent annual and semi-annual reports to shareholders.
Website Address at which Required Online Documents are Available
Under the Summary Prospectus rules, the website address must be specific enough to lead investors directly to the required online documents. The website can be a central website with prominent links to each required online document but cannot be a home page or other section of the website where the required online documents are not directly accessible.
Formatting Requirements for Online Documents
The Summary Prospectus rules establish certain formatting requirements for the required online documents:
- Human-readable: The required online documents must be presented in a human-readable manner and able to be printed on paper in human-readable format.
- Convenient for reading online and printing on paper: The required online documents must be presented in a format that is convenient for both reading online and printing on paper. This requirement can be satisfied by providing one format that is convenient for reading online and another that is convenient for printing on paper.
Linking Within and Between Documents
The Summary Prospectus rules contain two separate requirements for linking within and between electronic documents posted online:
- Linking of table of contents within Statutory Prospectus and SAI available online: Electronic versions of these documents must provide links enabling the reader to move directly between a table of contents and related sections within the document.
- Linking between Summary Prospectus and Statutory Prospectus/SAI available online: Electronic versions of the documents must provide links enabling the reader to move back and forth between each section of the Summary Prospectus and any related section of the Statutory Prospectus and SAI that provides additional detail.
- This linking requirement may be satisfied by including links either:
- Directly between each section of the Summary Prospectus and any section of the Statutory Prospectus or SAI that provides additional detail, or
- Located at both the beginning and end of the Summary Prospectus, or that remain continuously visible when accessing the Summary Prospectus, and table of contents of both the statutory Prospectus and SAI.
- This linking requirement may be satisfied by including links either:
Ability to Retain Documents
The Summary Prospectus rules require that persons accessing the website that appears on the cover page to the Summary Prospectus be able to permanently retain, free of charge, an electronic version of the required online documents. The retainable version of the online required documents must:
- Meet the format requirements of being human-readable and convenient for reading online and in paper; and
- Permit persons accessing the downloaded documents to move directly back and forth between each section heading in a table of contents of the document and the section of the document referenced in that section heading.
Additional Website Posting Requirements for Variable Products
In addition to the requirements previously mentioned, variable products are subject to the following website posting requirements:
- Website addresses: Any website address included in an electronic version of a Statutory Prospectus or Summary Prospectus (i.e., electronic versions sent to investors or available online) must include an active hyperlink or other means of facilitating access that leads directly to the relevant website address (for example, a continuously visible sidebar).
- Key Information Table: Cross references in electronic versions of a Statutory Prospectus or Summary Prospectus should link directly to the relevant location in the Statutory Prospectus or provide a means of providing access to the information through equivalent methods or technologies, such as including a continuously visible sidebar in the Summary Prospectus that includes hyperlinks to sections in the Statutory Prospectus).
- Definitions of special terms used in online summary prospectuses: A Summary Prospectus that is available online must permit persons accessing the document to either:
- View the definition of each special term used in the Summary Prospectus upon command (for example, by moving or “hovering” the computer’s pointer or mouse over the term, or selecting the term on a mobile device), or
- Move directly back and forth between each special term and the corresponding entry in any glossary or list of definitions in the summary prospectus.
ETFs
On September 25, 2019, the Commission adopted rule 6c-11 under the Investment Company Act that permits ETFs that satisfy certain conditions to operate without an exemptive order. ETFs that fall within the scope of rule 6c-11 are:
- registered open-end management investment companies;
- that issue and redeem creation units to and from authorized participants in exchange for a basket and a cash balancing amount, if any; and
- that issue shares that are listed on a national securities exchange and traded at market-determined prices.
Rule 6c-11 requires an ETF to comply with certain conditions, including to disclose certain information publicly and prominently display on its website. ETFs relying on rule 6c-11 must disclose the following:
- Daily Holdings: An ETF must post the portfolio holdings that will form the basis for each calculation of net asset value per share (NAV). They must be the ETF’s portfolio holdings as of the close of business on the prior business day. The disclosure must be available each business day before the opening of regular trading on the primary listing exchange of the ETF’s shares.
- For each holding, the ETF must disclose the following information (as applicable):
- Ticker symbol;
- CUSIP or other identifier
- Description of holding;
- Quantity of each security or other asset; and
- Percentage weight of holding in the portfolio.
- Daily Market Information: The ETF must post its current NAV, market price, and premium or discount each as of the end of the prior business day.
- Historic Premium and Discount Information: The ETF must post a table and line graph showing information regarding the ETF’s premiums and discounts during the most recently completed calendar year and calendar quarters of the current year, or the life of the ETF, if shorter.
- 30-Day Median Bid-Ask Spread: ETFs must post the ETF’s median bid-ask spread during the last rolling 30-calendar-day period, using national best bid and national best offer.
- Disclosure of ETF Premiums or Discounts Greater than 2%: If an ETF’s premium or discount was greater than 2% for more than seven consecutive trading days, it must disclose on its website that the premium or discount was greater than 2%, along with a discussion of the factors that are reasonably believed to have materially contributed to the premium or discount. This disclosure must appear on the website immediately following the 8th trading day and must remain posted for one year following the first day it was posted.
Other ETF Website Disclosure Requirements
ETFs that are not relying on rule 6c-11 must obtain and rely on an exemptive order granted by the Commission. These exemptive orders impose various conditions on the ETFs relying on the orders, many of which impose posting requirements. For example, certain ETFs, often referred to as “non-transparent” or “semi-transparent,” must include a legend on their websites that will highlight:
- the differences between these ETFs and fully transparent ETFs,
- daily market information,
- bid-ask spread, and
- any other information regarding premiums and discounts as may be required for other ETFs.
Some orders also impose additional conditions such as the publication of a tracking basket, a basket that is designed to be representative of the ETF’s holdings, but is not the actual holdings.
In addition, Form N-1A requires an ETF to either provide certain premium and discount information in its Prospectus and Annual Shareholder Report or disclose certain information required by rule 6c-11 on its website.
MMFs
Since 2010, the Commission has required MMFs to post portfolio holdings and other fund information on their websites. This information, which is required to be displayed prominently, includes the following:
- Portfolio Maturity and Holdings: MMFs must post for a period of not less than six months, beginning no later than the fifth business day of the month, a schedule of its investments, as of the last business day or subsequent calendar day of the preceding month, that includes:
- The dollar-weighted average portfolio maturity (“WAM”) and dollar-weighted average life maturity (“WAL”) with respect to the MMF and each class of its redeemable shares, and;
- Certain specified information as to each security held by the MMF.
- Daily Disclosure of Daily and Weekly Liquid Assets: MMFs must post a schedule, chart, graph, or other depiction, which must be updated each business day as of the end of the preceding business day, showing, as of the end of each business day during the preceding six months the percentage of the MMF’s total assets invested in daily liquid assets and weekly liquid assets, as well as the MMF’s net inflows or outflows.
- Daily Disclosure of Current NAV: MMFs must post a schedule, chart, graph or other depiction showing the MMF’s net asset value per share, as of the end of each business day during the preceding six months, updated each business day as of the end of the preceding business day.
- Form N-MFP Information: MMFs must post a link to the Commission’s website where a user may obtain the most recent 12 months of publicly available information filed on Form N-MFP.
- Form N-CR Information: MMFs must post for a period of not less than one year, beginning no later than the same business day on which the MMF files an initial report on Form N-CR, the form used to file current reports pursuant to rule 30b1-8 under the Act, in response to the occurrence of any event specified in Part C of that form, the same information required to be reported to the Commission on Part C, along with the statement required by the rule.
The key takeaway of this ADI is for companies to review their websites to ensure required disclosures are posted in compliance with any applicable rules and exemptive orders. Although the SEC doesn’t have a team “dedicated” to website compliance review, staff periodically reviews websites and provides feedback related to compliance and user experience.
Toppan Merrill is ready to help
Toppan Merrill continues to carefully review and analyze SEC regulatory changes. We have simple and straightforward platform solutions to help you manage the SEC requirements from end to end.
If you have questions about rule changes, discuss recent experiences or need assistance, the experts at Toppan Merrill can help. We also offer a range of additional resources so filers have the information to meet their regulatory compliance needs. Contact us today!
