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By: Jon-Luc Dupuy, Abigail P. Hemnes, Marguerite W. Laurent, and Cal J. Gilmartin, from U.S. law firm K&L Gates.

On 26 October 2022, the Securities and Exchange Commission (SEC) adopted final rule and form amendments (the Final Rules) representing major reforms to:

1) shareholder reports for open-end mutual funds and exchange-traded funds (ETFs) registered on Form N-1A; and 2) advertisement rules for all registered investment companies, including closed-end funds and business development companies (BDCs).

The Final Rules fundamentally transform shareholder reports, turning them into condensed documents that may be as short as three pages in length.

Significantly, the Final Rules also exclude open-end mutual funds and ETFs from the scope of Rule 30e-3, thereby again mandating paper delivery of shareholder reports and barring such funds from satisfying shareholder report transmission requirements by making reports available exclusively online and providing a notice of online availability to shareholders. In addition, the Final Rules amend the definition of "broad-based securities market index" in Form N-1A as discussed further herein.

While many aspects of the Final Rules closely follow elements of the SEC's originally proposed changes from August 2020 (the Proposed Rules), further refinements clarify or expand the applicability of certain requirements. In addition, several major changes in the Proposed Rules relating to prospectus disclosure a......................

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