Skip to Content

SEC Adopts New Rules to Enhance Investment Transparency

December 7, 2016 Blog

Earlier this fall, the Securities and Exchange Commission (SEC) announced new reporting and disclosure rules designed to help protect individual investors against fraudulent practices involving mutual funds and exchange-traded funds (ETFs). According to a press release announcing the decision to adopt the new rules:

“The new rules will enhance the quality of information available to investors and will allow the [SEC] to more effectively collect and use data reported by funds.  The new rules also will promote effective liquidity risk management . . . and will enhance disclosure regarding fund liquidity and redemption practices.”

So, what does this all really mean for individual investors?

New Protections for Investors in Mutual Funds and ETFs

Potentially, quite a lot. When it comes to making investment decisions and managing current investments, access to information is critical. You need to know that your investment is secure (aside from the inherent risk of investing in mutual funds and ETFs) and that you will have access to your funds when you need it. The SEC’s new rules are designed to help mitigate fraud risk by requiring enhanced transparency and to help ensure that mutual funds and ETFs will not over-leverage themselves to the point of illiquidity.

Some highlights of the SEC’s new rules for mutual funds and ETFs include:

  • New mandatory monthly reporting for registered funds, to include “portfolio-wide and position-level holdings data.”
  • Mandatory disclosure of data related to pricing of portfolio securities, securities lending activities and the risk measures used to limit exposure to market fluctuations.
  • Public disclosure of reported information 60 days after monthly reporting to the SEC.
  • An updated annual reporting mandate designed to collect information tailored to current risk concerns associated with mutual funds and ETFs sold to individual investors.
  • A consistent reporting structure that will allow the SEC to publish aggregated information directly comparing different mutual funds and ETFs.

The new rules will go into effect for larger funds (with greater than $1 billion in net assets) on June 1, 2018, while smaller funds will have until June 1, 2019 to come into compliance.

Taking Action to Recover Mutual Fund and ETF Investment Losses

Until then, investors in mutual funds and ETFs will need to continue to rely on the information that funds make available under the SEC’s current, less-rigorous reporting requirements. If you suffer losses in a mutual fund or ETF investment and believe that inaccurate or incomplete information may be to blame, you may be able to recover your losses in securities arbitration. Funds, brokers and advisory firms owe varying duties to individual investors; and, when they breach these duties, they can often be held liable for investors’ losses.

Speak With an Investment Fraud Attorney at Zamansky LLC

If you would like more information about the remedies available to investors who have lost money due to mutual fund fraud, contact Zamansky LLC for a free, no-obligation consultation. To speak with one of our experienced attorneys in confidence, call (212) 742-1414 or request an appointment online today.