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IM Releases Observations on Fund Disclosure Shortcomings

The SEC’s Division of Investment Management’s Disclosure Review and Accounting Office, which reviews fund disclosure filings, released a list of several issues it has spotted relating to performance and fee information in fund filings. The office hopes the release will encourage funds to closely review their performance and fee disclosures prior to providing them to investors. The disclosure issues included:

  • Performance presentations failing to reflect sales loads: Multiple funds failed to reflect sales loads in their average annual returns table. For example, funds with maximum loads from 5.00% to 5.75% that were excluded, resulting in overstated performance.
  • The staff also observed other errors in the presentation of fees in the prospectus, such as:
    • Showing negative performance as positive performance (in both the bar chart and average annual return table); and
    • Transposing the performance of fund classes (, showing class A performance as class B’s performance and vice versa) and transposing the performance of multiple benchmark indices.

The disclosure review office also described problems it observed in expenses disclosure, including funds incorrectly showing net expenses that exceed gross expenses; failing to disclose acquired fund fees and expenses; and failing to correctly calculate the expense example.

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