On March 20, 2019, the Securities and Exchange Commission adopted the Fixing America’s Surface Transportation Act (FAST Act) Modernization Rule. The Rule becomes effective May 2, 2019. While most of the amendments in the final rule affect corporate filers and operating companies, the rule will have a significant impact on Investment Company filers.
Effective April 1, 2020 all registration statement and Form N-CSR filings will need to be filed in HTML, eliminating ASCII. The EDGAR system will be updated to support Type 1 MODULES in HTML. In addition, the exhibit hyperlinking, which is currently required for corporate filings, will also be required for investment company filings on forms S-6, N-14, N-1A, N-2, N-3, N-4, N-5, N-6, N-8B-2, and N-CSR. This Rule also extends the hyperlinking requirements to any information incorporated by reference, not just exhibits.
Additionally, 30 days after the Rule is published in the Federal Register, “Registrants will not be required to file attachments to their material agreements if such attachments do not contain material information or were not other otherwise disclosed.” (Rule page 8)
Key excerpts from the final rule:
- Page 9: Effective as soon as the Rule is published in the Federal Register, “Registrants will be able to omit confidential information in material contracts and certain other exhibits without submitting a confidential treatment request to the Commission, so long as the information is (i) not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed.”
- Pages 29-30 – Automatic Confidential Treatment/Redaction: We are adopting parallel amendments to the registration forms used by investment companies to allow them to redact immaterial provisions or terms from exhibits filed as “other material contracts” that would likely cause the registrant competitive harm if publicly disclosed. We are also extending this treatment to information in reinsurance agreements required to be filed as exhibits under Forms N-3, N-4, and N-6. Staff of the Division of Investment Management has routinely granted confidential treatment as to information in reinsurance agreements in the past. We believe that extending this relief to these specific categories of exhibits will substantially reduce the burden currently borne by registrants in preparing and processing requests for confidential treatment, while still providing all material information to investors holding those contracts.
- Pages 85 and 86 – Clarification for Forms N-4 and N-6 under EDGARLINK: One commenter requested clarification on how the proposed HTML submission requirement would affect filers on Form N-4 and Form N-6 who use type 1 modules under EDGARLink to make these submissions, since the type 1 modules are currently only supported by ASCII, and not HTML.272After considering the comments, the SEC is requiring, as proposed, investment companies filing registration statements on Forms S-6, N-14, N-1A, N-2, N-3, N-4, N-5, N-6, and reports on Form N-CSR, to include a hyperlink to each exhibit (other than an exhibit filed in XBRL) identified in the filing’s exhibit index, unless the exhibit is filed in paper pursuant to a temporary or continuing hardship exemption under Rule 201 or Rule 202 of Regulation S-T, or pursuant to Rule 311 of Regulation S-T. In addition, the Commission is extending similar exhibit hyperlinking and HTML filing requirements to filings on Form N-8B-2. Consistent with rules for operating companies, investment companies are not required to refile electronically any exhibits previously filed in paper.
- 272 See letter from G. Stanzione. Modules are partial or complete documents that are intended to be included in an electronic submission. In connection with our ongoing efforts to upgrade EDGAR, we are updating type 1 and type 2 modules to permit their use in connection with filings made in HTML. These updates are expected to be completed by June 2019.
- Page 87 – Amendment to Regulation S-T Rule 105: In connection with the exhibit hyperlinking requirements, the Commission is also adopting an amendment to Regulation S-T Rule 105 to require filings on Forms S-6, N-14, N-1A, N-2, N-3, N-4, N-5, N-6, N-8B-2, and N-CSR be submitted in HTML format. Prior to this amendment, electronic filers were permitted to submit such filings in either the ASCII format or HTML format. Because the ASCII format does not support hyperlink functionality, the exhibit hyperlinking requirement is feasible only if documents are filed in HTML. Accordingly, electronic filers will now be required to file registration statements and reports on Form N-CSR (and any amendments thereto) in HTML format.
- Page 94 – Section B: Hyperlinks and HTML Format for Investment Companies: The SEC is adopting a transition period intended to provide investment company registrants time to prepare filings, to include hyperlinks to exhibits and to information incorporated by reference, as well as help mitigate the cost burdens related to switching over to HTML format for registrants currently submitting filings in ASCII. All registration statement and Form N-CSR filings made on or after April 1, 2020 must be made in HTML format and comply with the rule and form amendments pertaining to the use of hyperlinks. However, the SEC will welcome early compliance with the new filing requirements.
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Should you have questions about the 1940 Securities Act and the compliance requirements for investment companies, visit ToppanMerrill.com, connect with us via [email protected] or by phone at 800.688.4400.
