The staff of the SEC’s Division of Investment Management (the “Staff”) provided guidance (the “Guidance”) regarding the obligation to file with the SEC interactive content regarding mutual funds and certain other investment companies (collectively, “Funds”) posted in real-time electronic forums (i.e., chat rooms and social media) (“Interactive Content”). The Guidance is designed to address the circumstance in which Interactive Content relating to a Fund may be subject to an SEC filing obligation because it has not been filed with the Financial Industry Regulatory Authority (“FINRA”) pursuant to FINRA Rule 2210, as Fund marketing materials customarily are.
Background. In addition to FINRA filing requirements, Fund marketing materials may also be subject to the filing requirements of Section 24(b) of the Investment Company Act of 1940 (“Section 24(b)”) relating to “sales literature” and Rule 497 under the Securities Act of 1933 (“Rule 497”) relating to advertisements relying on Rule 482 under the Securities Act of 1933 (collectively, “SEC Filing Obligations”); however, any SEC Filing Obligation is met if the Fund marketing materials in question have been filed with FINRA. Interactive Content is not subject to FINRA filing requirements under 2010 FINRA guidance that treats Interactive Content, in contrast to static content that stays posted on a website until removed, as a “personal appearance.” The Guidance addresses the question of whether, in the absence of any FINRA filing, Interactive Content regarding a Fund must be filed with the SEC to satisfy SEC Filing Obligations.
SEC Filing Obligations May Not Apply. The Staff believes that not all Interactive Content must be filed with the SEC. The Guidance is qualified by the statement that the determination regarding whether Interactive Content should be filed with the SEC will vary depending on the particular facts and circumstances, such as the underlying substantive information transmitted to the social media user and whether the interactive communication is merely a response to a request or inquiry from the social media user or is forwarding previously-filed content.
The Guidance lists the following categories of Interactive Content that the Staff believes would generally not be subject to SEC Filing Obligations (with examples that provide important illustrative detail):
- “An incidental mention of a specific investment company or family of funds not related to a discussion of the investment merits of the fund.”
- “The incidental use of the word ‘performance’ in connection with a discussion of an investment company or family of funds, without specific mention of some or all of the elements of a fund’s return (e.g., 1, 5 and 10 year performance).”
- “A factual introductory statement forwarding or including a hyperlink to a fund prospectus or to information that is filed pursuant to Section 24(b) or Rule 497.”
- “An introductory statement not related to a discussion of the investment merits of a fund that forwards or includes a hyperlink to general financial and investment information such as discussions of basic investment concepts or commentaries on economic, political or market conditions.”
- “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.”
When SEC Filing Obligations Apply. The Guidance also lists the following categories of Interactive Content that the Staff believes generally are subject to SEC Filing Obligations (with examples that provide important illustrative detail):
- “A discussion of fund performance that provides specific mention of some or all of the elements of a fund’s return (e.g., 1, 5 and 10 year performance) or promotes a fund’s returns.”
- “A communication initiated by the issuer that discusses the investment merits of the fund.”
The Guidance notes that an issuer cannot avoid SEC Filing Obligations by posting Interactive Content that “hyperlinks to or attaches material that should be, but has not been, filed (e.g., a fund fact sheet).”