SEC Staff Wants Funds to Add COVID-19 Risk Disclosures
The staff of the SEC’s Division of Investment Management has warned open-end funds to consider enhancing risk disclosures for COVID-19 events as they file their annual post-effective amendments. The staff warns investment companies to assess disclosures and financial statements or risk a regulatory cessation of all selling activities. The staff is concerned that the 45% of U.S. households that invest in funds receive “material and timely information.” The staff also reminded fund sponsors that they must deliver paper prospectuses to new investors unless the investor has affirmatively chosen electronic delivery.
We are assuming that this statement means that investment companies that update prospectuses with COVID-19 disclosures can still make a 485(b) filing (immediate effectiveness) even though the registration statement doesn’t meet the specific requirements. Regardless, fund sponsors are on notice that the staff is looking for enhanced pandemic disclosures.