SEC Report Highlights Missing Disclosures By ETFs, Mutual Funds

Posted on October 28th, 2021 at 2:58 PM
SEC Report Highlights Missing Disclosures By ETFs, Mutual Funds

From the Desk of Jim Eccleston at Eccleston Law:

The Securities and Exchange Commission’s (SEC’s) exam division has uncovered mutual funds and exchange-traded funds (ETFs) that have issued flawed or missing disclosures regarding fees, investment strategies and performance. The relevant disclosures were provided in fund filings, advertisements and sales literature, according to the SEC. The SEC’s Division of Examination completed a set of exams that concentrating on mutual funds and ETFs to evaluate regulatory compliance and industry practices that may impact retail investors. The SEC released a Risk Alert, which highlighted exam staff observations of more than 200 funds and at least 100 advisors. While the exam division only issued deficiency letters to some firms, findings from the risk alert can enable all funds to effectively measure compliance risks, according to the SEC. SEC exam staff noted inaccurate, incomplete or omitted disclosures on a multitude of sales literature and advertising-related topics, including: 

  1. Investment strategies and portfolio holdings.
  2. The differences in investment objective between predecessor and successor funds.
  3. Inception dates.
  4. Funds’ expenses, contractual expense limitations or expense ratios.
  5. Average total returns or gross expenses and net expenses.
  6. Performance information not disclosed with the required legends.
  7. Awards received for fund performance.
  8. Weighting of index constituents in the benchmark index.
  9. Methodologies for calculating the performance of the benchmark index.
  10. Differences in holdings, risk and volatility between the broad-based and bespoke indexes used for performance comparisons.
  11. Composition of index used for performance comparisons.

Tags: eccleston, eccelston law, sec, eft, mutual funds

Return to Archive

TESTIMONIALS

Previous
Next

If you find yourself in trouble with the regulators, call Eccleston Law, you won't regret it.

Rick R.

LATEST NEWS AND ARTICLES

March 24, 2023
Heartland Bank & Trust Co. Agrees to $9 Million Settlement For Allegedly Aiding and Abetting a Ponzi Scheme

The Securities and Exchange Commission (SEC) has agreed to a $9 million settlement
with Heartland Bank & Trust Co. over the bank’s alleged role in aiding and abetting a $75
million Ponzi scheme.

March 23, 2023
Morgan Stanley Obtains TRO Against Pennsylvania LPL Advisor Over Inherited Accounts and Misrepresentations

A federal judge has awarded Morgan Stanley a temporary restraining order (TRO)
against a Pennsylvania-based advisor who recently departed for LPL Financial.

March 22, 2023
Sanford Bernstein & Co. and Alliance Bernstein Face FINRA Arbitration Claim Over Options Advantage Strategy

Sanford Bernstein & Co. and Alliance Bernstein (Bernstein) are facing what could be the first of several Financial Industry Regulatory Authority (FINRA) arbitration claims related to its Options Advantage Strategy.