Adherence of Retirement Mutual Fund Providers to the Securities and Exchange Commission (SEC)’s Advertising Guidance: Provision and Readability of Advertising Disclosure

Purpose – To explain a guidance update recently issued by the USA Securities and Exchange Commission (SEC) Division of Investment Management that furthers the SEC’s goal of clear and concise, user-friendly disclosure by focusing on certain specified requirements of Form N-1A and the rules under the Securities Act of 1933. Design/methodology/approach – Discusses five areas where the SEC staff had been providing significant numbers of comments related to mutual fund disclosure after the adoption of the amendments to Form N-1A in 2009 by summarizing the applicable instructions of Form N1-A and/or rule and the SEC staff’s observations with respect to such instruction or rule. Findings – Funds should ensure that during their next annual update they review their prospectus disclosure in light of this guidance update and make necessary changes so that the disclosure is clear and concise and not overly technical. Originality/value – A concise summary of the SEC’s guidance update from experienced investment management lawyers.

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Mutual Fund Incubation and the Role of the Securities and Exchange Commission

Journal of Business Ethics ◽

10.1007/s10551-006-9081-x ◽

2006 ◽

Vol 70 (1) ◽

pp. 33-37 ◽

Cited By ~ 6

Author(s):

Carl Ackermann ◽

Tim Loughran

Keyword(s):

Mutual Fund ◽

Securities And Exchange Commission

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Harnessing Whales: The Role Of Shadow Price Disclosure In Money Market Mutual Fund Reform

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v11i4.7747 ◽

2013 ◽

Vol 11 (4) ◽

pp. 187

Author(s):

Larry G. Locke ◽

Ethan Mitra ◽

Virginia Locke

Keyword(s):

Mutual Fund ◽

Financial Stability ◽

Shadow Price ◽

Money Market ◽

Securities And Exchange Commission ◽

Shadow Prices ◽

Font Size ◽

Money Market Funds ◽

Fund Industry ◽

The Impact

The money market mutual fund industry is experiencing a sea change. Thanks, in large part, to their role in the 2008 market break, U.S. securities regulators have targeted money market funds for a structural overhaul. Runs on money market funds by institutional investors in the wake of the Lehman Brothers bankruptcy weakened the short-term credit market to the point of collapse. The resulting intervention of the Federal Reserve and the Treasury may have saved the economy from further damage but came at such a perceived cost that legislation now forbids it. Both the Securities and Exchange Commission (SEC) and the Financial Stability Oversight Council (FSOC) believe restructuring is necessary. Their only question appears to be exactly what form the product will take. One of the elements being considered in the reform effort will be increased disclosure of money market fund shadow prices. The regulators have posited that more frequent and more available disclosure of fund shadow prices will lead to more discipline being exerted on the fund industry, especially by the institutional market. A revamped disclosure regime, however, has been in effect since monthly shadow price disclosures were imposed by the SEC in December 2010. This study looks at the impact of those 2010 disclosure regulations on different sectors of the market. It seeks to identify a correlation between shadow prices and changes in assets for both retail and institutional funds. The authors assess the findings of the study and discuss the implications of those findings for the impending regulatory restructuring.

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SEC fines alternative mutual fund adviser for improper handling of fund assets

Journal of Investment Compliance ◽

10.1108/joic-04-2015-0028 ◽

2015 ◽

Vol 16 (2) ◽

pp. 35-37

Author(s):

Michael McGrath ◽

Pablo J. Man

Keyword(s):

Mutual Funds ◽

Mutual Fund ◽

Financial Services ◽

Securities And Exchange Commission ◽

Investment Strategies ◽

Investment Company ◽

Content Type ◽

Enforcement Action ◽

Policies And Procedures ◽

Repurchase Agreements

Purpose – To explain that the Securities and Exchange Commission (“SEC”) brought and settled charges against an investment adviser to several alternative mutual funds alleging, among other charges, failure to comply with the custody requirements of the Investment Company Act of 1940, as amended (the “1940 Act”). Design/methodology/approach – To explain that the Securities and Exchange Commission (“SEC”) brought and settled charges against an investment adviser to several alternative mutual funds alleging, among other charges, failure to comply with the custody requirements of the Investment Company Act of 1940, as amended (the “1940 Act”). Findings – The enforcement action serves as an important reminder for the growing number of advisers of alternative mutual funds to be mindful of specific restrictions and obligations when managing registered funds that do not apply to private funds and separate accounts. This action shows that the SEC will bring charges even when the alleged violations do not result in harm to investors. Practical implications – The 1940 Act, the rules thereunder, and SEC staff guidance relating to alternative investment strategies are complicated and not intuitive. These standards can constrain a registered fund’s ability to employ options, futures, swaps, prime brokerage, repurchase and reverse repurchase agreements, enhanced leverage through securities lending, and other facilities. As the SEC continues to examine alternative mutual funds, advisers to these funds should remain cognizant of the obligations arising under the 1940 Act and the implementation of fund policies and procedures. Originality/value – Practical guidance from experienced financial services lawyers.

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Liability of Foreignness: The Impact of Elimination of the Reconciliation Requirement on International Asset Allocation by U.S. Investors

Journal of International Accounting Research ◽

10.2308/jiar-51951 ◽

2017 ◽

Vol 17 (2) ◽

pp. 75-95 ◽

Cited By ~ 1

Author(s):

Michael T. Dugan ◽

Elizabeth H. Turner ◽

Clark M. Wheatley

Keyword(s):

Asset Allocation ◽

Mutual Fund ◽

Institutional Investors ◽

Stock Exchange ◽

Cost Savings ◽

Securities And Exchange Commission ◽

Firm Level ◽

Financial Disclosures ◽

International Asset Allocation ◽

The Impact

ABSTRACT In 2007, the Securities and Exchange Commission (SEC) eliminated the 20-F requirement to reconcile IFRS financial disclosures to U.S. GAAP. We find that this change in SEC regulation is associated with an overall decrease in the international asset allocation of U.S. institutional investors in European Union (E.U.) firms that are cross-listed on U.S. stock exchanges. We also find that U.S. mutual fund investors were more likely to invest in firms in countries with greater levels of investor protection and higher global visibility in the post-elimination period. A learning effect (measured as the length of time a firm is cross-listed on a U.S. stock exchange) is not, however, associated with U.S. institutional ownership. These results are robust to tests involving removal of OTC ADRs, firm-level controls, country controls, and financial controls resulting from the elimination of the 20-F reconciliation. Our results suggest that the increased information processing costs were not offset by information preparation cost savings. Our results indicate that the elimination of the 20-F reconciliation of IFRS to U.S. GAAP resulted in a loss of valuable information for U.S. institutional investors and thereby resulted in a divestment in cross-listed E.U. firms.

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To Group or Not to Group? Evidence from Mutual Fund Databases

Journal of Financial and Quantitative Analysis ◽

10.1017/s0022109017000655 ◽

2017 ◽

Vol 52 (5) ◽

pp. 1989-2021 ◽

Cited By ~ 32

Author(s):

Saurin Patel ◽

Sergei Sarkissian

Keyword(s):

Mutual Fund ◽

Performance Metrics ◽

Empirical Studies ◽

Fund Performance ◽

Securities And Exchange Commission ◽

Data Sets ◽

Team Management ◽

Industry Performance ◽

Direct Data ◽

Managed Funds

Despite the overwhelming trend in mutual funds toward team management, empirical studies find no performance benefits for this phenomenon. We show it is caused by large discrepancies in reported managerial structures in Center for Research in Security Prices and Morningstar Principia data sets versus U.S. Securities and Exchange Commission records, resulting in up to 50-basis-points underestimation of the team impact on fund returns. Using more accurate Morningstar Direct data, we find that team-managed funds outperform single-managed funds across various performance metrics. The relation between team size and fund performance is nonlinear. Also, team-managed funds take on no more risk than single-managed funds. Overall, team management benefits fund industry performance.

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