Key aspects of Rule 30e-3
- Rule 30e-3 allows, but does not mandate, mutual funds to use the “Notice & Access” method to deliver Annual Reports (ARs) and Semi-Annual Reports (SARs), instead of mailing full paper reports
- Funds can mail a notice of the internet availability of shareholder reports beginning January 1, 2021
- Existing e-delivery consents will continue to be applied
- Investors who have not opted for e-delivery will receive a paper notice in the mail that includes:
- Details of the website where they can read the full report
- Instructions for requesting a full paper report by mail, on an ad hoc basis or permanently
- Instructions for e-delivery sign-up
- The rule allows funds to include summary content from the full shareholder report
Implications for broker-dealers and the fund industry
- Funds that plan to start sending notices on January 1, 2021 must add notifications on the front page of prospectuses and shareholder reports for two years, including instructions on how to sign up for full paper reports and e-delivery (if applicable), starting January 1, 2019
- Funds and broker-dealers will need to have the ability to capture shareholder preferences for full paper reports starting January 1, 2019
- Existing e-delivery consents will continue to be applied. Future e-delivery or full paper report elections are to be applied at an account level
- Notices can be consolidated with certain other documents, including summary prospectuses, statutory prospectuses, statements of additional information, account statements and proxy notices
- Notices can be created by broker-dealers, including consolidated notices across funds, with the cooperation of funds
- Notices must be sent out within 70 days from the date of fiscal close
- Request for full paper reports must be fulfilled within three business days
- If fund-generated notices do not have a telephone number or other contact information for the broker-dealer, broker-dealers can include a cover page with the notice that provides such information
Broadridge is creating a comprehensive preference collection solution to collect shareholder preferences for full paper reports during the extended transition period starting Jan 1, 2019. This solution can be used by both, broker-dealers and funds for beneficial and direct-held shareholders, respectively. Watch this space for further details.
Notice and Access Fees
Regulated notice and access fees under amended NYSE schedule to apply for all mailed notices. Notice and access fees cannot be charged on any accounts for which a fund pays a preference management fee.
Content in the Notice
A) What content should be in the notice?
- A prominent legend that the shareholder report is available online and in paper by request
- Language that the report contains important information about the fund including portfolio holdings and financial statements
- URL of the Website where the full report is available
- The website does not have to be specific for each report; however, the shareholders must be able to navigate to the required document with one click
- The website can be hosted by the fund, broker-dealer, or third party
- A toll-free telephone number to contact the fund or the broker-dealer
- Instructions for requesting full paper report or email copy, free of charge
- Instructions for how to opt for full paper reports in the future
- Instructions for how to opt for e-delivery for future reports
B) Additional information that MAY be included in the notice
- Funds can include information from the full report in the notice, such as a list of the fund’s top 10 holdings, performance information, the type of fund, brief statement of the fund’s objectives and investment strategies, expense ratios and the name of fund manager. If including content, funds must file the notice with their Form N-CSR filing
- If a fund chooses to include any particular information such as performance of the fund, the content should include all information appropriate for the shareholder to have, and should not be selective
- There is no specified page limit, but funds should limit optional content to a relatively brief amount to avoid detracting from the primary purpose of the notice, and to encourage investors to access the full report
- A control number or account number - a unique way to identify a shareholder for ease of preference management
- Pictures, logos or similar design elements as long as they are not misleading
Example of an enhanced notice with content
Compliance dates and extended transition period
- The rule is optional and effective January 1, 2019, with funds allowed to distribute notices starting January 1, 2021
- The extended transition period starts January 1, 2019. Funds need to provide two years of notification to shareholders if using the notice before January 1, 2022
- Notification is to be done through disclosures on the front page of prospectuses, ARs and SARs
- Shareholders are allowed to communicate their preferences for full paper reports immediately after receiving notification, starting January 1, 2019
For additional information on the ruling and how it may impact your business, please complete the following form.
This is not intended as legal advice. We recommend you contact your legal counsel for a complete understanding of the ruling.
