Mutual fund and other investment companies are required to file certain advertisements for review by the Financial Industry Regulatory Authority (FINRA). Erring on the side of caution, many mutual funds and other investment companies may have been filing materials on their social media sites with FINRA unnecessarily, the SEC staff learned.
The IM Guidance Update provides examples of the kinds of communications that the staff believes would be subject to the filing requirements of Section 24(b) of the Investment Company Act of 1940—“Our quarter-end returns have exceeded our expectations!”—and examples of communications that would not trigger a filing requirement—“More than 100 Fund X employees volunteered for our Annual Day of Caring!”
The update on social media is intended to help firms strengthen compliance efforts by providing meaningful, real-life examples in a format that is accessible to all on the SEC’s website, said Norm Champ, director of the division of investment management. “We expect future guidance updates will highlight other relevant issues for funds, advisers and the public,” Champ said.
The Division of Investment Management works to protect investors, promote informed investment decisions and facilitate appropriate innovation in investment products and services through regulation of the asset management industry.
The guidance, available here, is the first in the Division of Investment Mangement’s “IM Guidance Update” series, which will offer the staff’s views on emerging legal issues. The goal is to increase transparency and enhance compliance with federal securities laws and regulations.
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