SEC Approves FINRA Rule Amendments Governing Mutual Fund Retail Communications

Investment Management Update

Date: November 07, 2016

In October 2016, the SEC approved amendments to the filing requirements in FINRA Rule 2210 and the disclosure requirements for bond fund volatility ratings in FINRA Rule 2213. The amendments were proposed in May 2015, and the amended rules will be effective January 9, 2017.

Rule 2210
Shareholder Reports

FINRA currently requires member firms to file the management’s discussion of fund performance section of a mutual fund’s shareholder report if the report is distributed or made available to prospective investors. Under amended Rule 2210, firms will no longer be required to submit the management discussion section, provided that the shareholder report, including the management discussion section, has been filed with the SEC.

Backup Material for Fund Performance Rankings

A firm that files a retail fund communication containing a performance ranking or comparison currently is required to also include backup material substantiating the performance or comparison in its submission to FINRA. The amended rule eliminates this requirement because FINRA now has online access to performance ranking and comparison information. The amended rule does require firms to maintain such backup material as part of their records.

Generic Mutual Fund Communications

Current Rule 2210 requires that firms file any retail communications “concerning” mutual funds. The amended rule will require only that retail communications concerning a specific mutual fund or mutual fund family be filed. For example, retail communications that describe different types of mutual funds (e.g., a description of balanced mutual funds) without promoting a specific mutual fund or fund family would not need to be filed with FINRA.


Firms are not currently required to file retail communications based on templates that have been previously filed and reviewed by FINRA. Firms are required to refile such communications if the narrative information in the communication has changed from the prior filing. Communications that fall into this category are often fund fact sheets or quarterly updates that provide information regarding a fund’s performance and holdings.

Under the amended rule, firms will no longer be required to file non-predictive narrative disclosure that discusses market events and portfolio changes during the period covered by the communication or that provides updated information sourced from a fund’s regulatory documents filed with the SEC.

Rule 2213
Bond Mutual Fund Volatility Ratings

Firms currently may use bond mutual fund volatility ratings in a retail communication, provided that the retail communication is accompanied or preceded by the fund’s prospectus, the retail communication is filed with FINRA at least 10 business days prior to first use and any changes to the retail communication provided by FINRA are made prior to its distribution.

Under amended Rule 2213, firms will not be required to have the prospectus accompany or precede a retail communication that includes bond mutual fund volatility rating disclosure. Firms also will only be required to file such retail communications within 10 days of first use, rather than 10 days prior to first use.

Further, the content requirements under amended Rule 2213 have been modified so that firms will no longer be required to provide the following in a retail communication that includes bond mutual fund volatility rating disclosure:

  • A separate risk disclosure statement that contains all disclosures required by the rule
  • All current bond mutual fund volatility ratings issued for the fund
  • Reasons for any change in ratings
  • Criteria and methodologies used to determine the rating
  • A statement that not all bond funds have volatility ratings
  • A statement that the fund’s portfolio may have changed since date of rating

For more information, please contact:

Andrew J. Davalla

Donald S. Mendelsohn

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