June 5, 2013
Previously published on May 30, 2013
The staff of the SEC’s Division of Investment Management has issued guidance for mutual funds in response to questions about whether certain interactive content posted in social media, chat rooms, or other “real-time electronic forums” is advertising that should be filed under the Investment Company Act or the Securities Act. The staff said that not all of these communications need to be filed but cited a number of examples of communications that would trigger a filing requirement. Whether a communication needs to be filed depends on its content, context, and presentation. For example, if fund performance is discussed and specific mention is made about the elements of a fund’s performance (for example, one-, five-, or 10-year returns) or if the communication promotes a fund’s returns, then it should be filed. An example would be “Our quarter-end returns have exceeded our expectations!” (The guidance noted that merely using the word “performance” would not trigger the filing requirement, as long as the communication does not mention specific elements of the fund’s returns.) If the discussion is not related to the investment merits of a fund but incidentally mentions a fund or family of funds, it need not be filed. Examples provided in the guidance include: “Fund X Family of Funds invites you to their annual benefit for XYZ Charity” or “Consumer Reports has written an article in which it mentions our Brand X Rewards Card. Are you a card member?” Mutual funds should review and understand the guidance, and review their procedures and policies on advertising and sales literature to determine if any modifications are advisable in light of the guidance. They should also ensure that their compliance personnel are familiar with the guidance.
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