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SEC Provides Guidance on Social Media Filing Requirements

The SEC recently provided guidance on the filing requirements for interactive content posted in a real-time electronic forum (i.e. chat rooms or other social media). SEC staff noted that out of an abundance of caution, many mutual funds may file materials unnecessarily. Whether a particular communication needs to be filed depends on the content, context and presentation of the communication, including whether the communication was responding to a request or inquiry from a social media user or was forwarding previously-filed content.

The SEC provided the following examples of communications that generally do not need to be filed:

  • Incidental mentions of a specific investment company not related to a discussion of the investment merits of the fund (e.g., "More than 100 Fund X employees volunteered for our Annual Day of Caring!").
  • Incidental use of the word "performance" without specific mention of some or all of the elements of a fund's return (e.g., "We update the performance of our funds every month and publish the results on").
  • A factual introductory statement forwarding or including a hyperlink to a fund prospectus or to information that has been filed with the SEC (e.g., "We launched two new emerging market funds this week. More information about them is available here ").
  • An introductory statement not related to the investment merits of a fund that includes a hyperlink to general financial and investment information ("Here's a Q&A with our Portfolio Manager, John Doe, regarding his views on the economy for 2013.").
  • A response to an inquiry by a social media user that provides discrete factual information that is not related to a discussion of the investment merits of the fund and that may direct the social media user to the fund prospectus or information filed with FINRA (e.g., Inquiry: "What are the fees and expenses for ABC Fund?" Response: "Information on the fund's fees and expenses is available at . Feel free to contact us at 1-800-***-**** for more information.").

The staff also provided examples of communications that do need to be filed:

  • A discussion of fund performance that provides specific mention of a fund's returns or promotes fund returns.
  • A communication initiated by the issuer that discusses the investment merits of the fund (e.g., "Our ABC Fund was included in the list of best new funds recently published by Morningstar.").

The guidance from the Division of Investment Management is the first in its "IM Guidance Update" series that will offer the staff's views on emerging legal issues. This guidance update was intended to help firms strengthen their compliance efforts by providing real life examples.

Sources: SEC Issues Guidance Update on Social Media Filings by Investment Companies, SEC Release No. 2013-40, March 15, 2013; IM Guidance Update No. 2013-01, Division of Investment Management, March 2013.

Copyright © 2020 Godfrey & Kahn S.C.National Law Review, Volume III, Number 103

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Godfrey & Kahn has one of the Midwest's largest investment management practices, with a team of attorneys dedicated solely to investment management clients. Our team offers a wide range of experience and includes attorneys who have worked at the SEC, held senior executive positions at national and international mutual fund groups and served as in-house counsel to companies within the investment management industry. This broad experience gives us the insight and understanding necessary to advise clients in the United States and abroad on the complex issues faced by investment management...

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