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 What are the summary prospectus rule amendments?
- There are three parts to the rule amendments
- The amendments require every prospectus to include a summary section at the front of the prospectus containing key information, to appear in plain English, in a standardized order, at the front of every mutual fund's statutory prospectus, in place of the current risk/return summary.
- TThe amendments also allow open-end management investment companies, registered under form N-1A, to fulfill their prospectus delivery obligations by providing a summary prospectus, which contains the same key information as the summary section, to the investor. They must also make additional information such as the statutory prospectus, SAI and shareholder reports available on the internet and in print upon request.
- TThe Commission has amended certain disclosures required by exchange traded funds (ETFs) registered as open-end management investment companies, which file on Form N-1A.
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What is the difference between the summary section and the summary prospectus?
- The summary section is replacing the current risk/return summary in the prospectus. The summary prospectus is the four- to eight-page document that can be provided to investors in place of the complete prospectus. The information, required by the SEC rule, must be the same in both and in the same order. See the next question (number 3) for what is different in the summary prospectus
Can the summary prospectus be different from the summary section?
- They must be the same except for the following information, which is required on the cover page or at the beginning of the summary prospectus - and not in the summary section:
- The fund's name and the share classes to which the summary prospectus relates;
- The exchange ticker symbol of the fund's securities or, if the summary prospectus relates to one or more classes of the fund's securities, adjacent to each such class, the exchange ticker symbol of such class of the fund's securities;
- A statement identifying the document as a summary prospectus; and
- The approximate date of the summary prospectus's first use.
Do I have to produce a summary prospectus?
- No. The summary prospectus is voluntary.
What are the requirements if I choose to produce a summary prospectus?
- If a fund company chooses to deliver a summary prospectus in place of the statutory prospectus, they must meet the additional specific requirements including:
- The fund's summary prospectus, statutory prospectus, SAI, and most recent annual and semi-annual reports to shareholders must be accessible, free of charge, at a website (the website must be disclosed on the cover or at the beginning of the summary prospectus);
- These disclosure documents are accessible online for at least 90 days after the summary prospectus is delivered to investors;
- Investors are able to retain an electronic version of the disclosure documents through downloading or otherwise, free of charge;
- The full statutory prospectus and the SAI on the website include a table of contents with hyperlinks, or bookmarks, directing a reader to the relevant sections within the document;
- A reader can link between the summary prospectus and the related statutory prospectus and SAI within two clicks.
What kind of linking is required? Is the back button in my browser sufficient?
- Relying on a browser or email back button may satisfy the requirement, but only if it works and is available across all versions and variations of internet and email browsers so we do not recommend it. The SEC also permits the links to be external to the documents, in which case they would not even appear in the online versions of the documents.
RR Donnelley offers three solutions for linking:
- Section to section: hyperlinks within the document section headings
- File to file: hyperlinks at the beginning or end of the documents, or, in the bookmark window
- Web navigation: header tabs for each document in a webpage format
If a user downloads a summary prospectus, statutory prospectus, SAI or shareholder report, must the linking between documents be maintained?
- No, the permanently retained (downloaded) document is not required to be in a format that allows an investor to move back and forth between the summary prospectus and the statutory prospectus or SAI because of technical difficulties associated with maintaining these links.
What if I do not want to print a summary prospectus, do I still have to create a summary section in the statutory prospectus?
- Yes. Open-end management investment companies, registered under form N-1A must update their statutory prospectuses to include the new format and disclosure requirements in the summary section beginning January 1, 2010.
What is the compliance deadline?
- The amendments are effective as of March 31, 2009. All initial registration statements on Form N-1A and all post-effective amendments that add a new series or are annual updates to effective registration statements on Form N-1A, filed on or after January 1, 2010, must comply with the amendments. The summary prospectus may be adopted at anytime after the initial compliance date, as long as the additional requirements are met (refer to question number 3).
Must I comply with the rule?
- Open-end management investment companies, and exchange traded funds (ETFs), registered under form N-1A.
Does the summary prospectus have to file?
- Yes. It must be filed no later than the date it is first used and as a part of the registration statement under Form 497K.
Can you file multiple summary prospectuses in one 497K?
- No. Each summary prospectus must file as its own Form 497K.
I produce a Variable Annuity, Variable Life fund. Is the summary section and summary prospectus applicable?
- Only open-end management investment companies and exchange traded funds (ETFs), registered under form N-1A are included in these parts of the rule. If they file under N-4 or N-6 then they are not required to update.
Is there a page limit to the summary prospectus?
- The SEC suggests the summary information should be presented in three to four pages per fund. The amendments do not include a specific page limit. The SEC has mentioned any summary that is more than eight pages may be viewed as not concise. They have repeated this in our multiple calls and have mentioned if a company is having difficulty, they need to make sure they are only including the information required. The SEC is directing fund companies to discuss this with their SEC reviewer(s).
I have one prospectus containing three funds, do I have to create three summary sections?
- Yes. Each fund must be presented in its own separate summary section. Information for multiple share classes of the same fund, however, may be combined. For example: XYZ Funds has a Domestic Equity Funds that covers, small-cap, mid-cap and large cap funds. There must be a separate summary section for each of those funds. If the small-cap fund has a Class A, B and C, then the small-cap summary section can combine information about all three classes.
Can you print multiple summary prospectuses as one document?
- No. The exception to this is when the summary prospectus is for a fund that is used as an investment option for retirement plans and variable insurance contracts. Then you can print them with other summary prospectuses and other full statutory prospectuses.
What is the greater prominence rule?
- When the summary prospectus is printed as a part of an insurance product (see number 16), or mailed with other documents in an envelope, they must be placed in front - or on top - of the other information so that the investor sees it first.
If there are multiple funds can I combine any of the common information?
- Yes, where the information contained in any of items six through eight (Item six: purchase and sale of fund shares; Item seven: tax information; and Item eight: financial intermediary compensation) of Form N-1A is identical for all funds covered by a multiple fund prospectus. The information must appear after the separate individual fund summaries (before the rest of the prospectus), and a statement directing readers to the section and page number containing the information must be included in each individual fund summary section at the location where such information would have appeared.
Is there a requirement that the summary prospectus and the statutory prospectus need to be the same printed size?
- No. The summary section in the statutory prospectus and the summary prospectus only need to have the same information in the same order. There is not requirement on style or trim size.
If I choose to produce summary prospectuses, will I be able to continue to send the summary prospectus using an e-delivery platform?
- Yes. If an investor opted to receive their prospectus via electronic delivery before, then the fund can rely on that same consent for summary prospectus delivery.
What is the lightest weight paper you can use to produce the summary prospectus?
- 50# WFT is the lightest we recommend in order to be able to fold and wafer seal the summary prospectus to go as a self mailer.
- 35# WFT is the lightest we would recommend if it were being inserted into envelopes.
What impact will the currently pending United States Postal Service regulation (that would limit printing on what would be the external facing sheets after folding and wafer sealing to the address/return address/indicia) have on the production of a summary prospectus?
- There is no additional impact on your company. RR Donnelley has already made adjustments in anticipation of this regulation.
Does the summary prospectus have to be folded and wafer sealed?
- No it is not a requirement that the summary prospectus be a self mailer. It can be mailed with other pieces. However, RR Donnelley has recommended fold and wafer seal when the piece will go out alone in order to gain the maximum postal discount.
Can the summary prospectus be mailed flat with other pieces, including other summary prospectuses?
- Yes. However, each summary prospectus must be printed separately and must have greater prominence (meaning it must appear on top) than any other type of document it is mailed with.
Is the summary prospectus required to be filed in XBRL?
- No, the Commission has already proposed to require a significant portion of the information that is contained in the summary prospectus to be filed in interactive data format with the summary section of the statutory prospectus.
Will variable annuities/separate accounts be impacted?
- If the fund is a separate account filed under Form N-4 or N-6 they are not included in this rule.
- If the variable annuity is filed under N-1A they are included and must follow all of the guidelines indicated here for their fund prospectus(es). The biggest impact will be that they will need to have a TOC with page numbers or have tabs that clearly indicate where the investor can turn for information about an underlying fund.
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