New Procedures for Mutual Fund and Insurance Product SEC Filings
Life, Annuity, and Retirement Solutions | Securities Transactions and Compliance | Securities & Investment Companies | Financial Services Regulatory | Insurance | April 4, 2019
In Release No. 33-10618 (Mar. 20, 2019), the SEC adopted amendments (the “Amendments”) that consolidate, conform, and otherwise refine numerous requirements applicable to filings with the agency. This Alert calls attention to certain new requirements that will have particular relevance to mutual funds, variable annuities, variable life insurance, and other insurance products registered with the SEC.
Confidential Treatment of Terms in Exhibits
Historically, registrants wishing to redact confidential terms from “reinsurance agreements” or other “material contracts” required to be filed as exhibits to SEC filings have had to submit confidential treatment requests to the SEC. The SEC would grant any such confidential treatment only for a limited period of time, so that subsequent requests for the SEC to extend the relief also might be necessary.
Under the Amendments, such requests for confidential treatment (or extensions) are no longer required. Rather, a registrant need only file the reinsurance agreement or other material contract as an exhibit (a) with the confidential terms redacted and (b) with representations on the cover page of the exhibit that the redacted information is not “material” and would likely cause competitive harm to the registrant if publicly disclosed. The standards for making such representations are comparable to standards that historically have applied to confidential treatment requests for such terms.
Although the new procedure is available immediately, it does not supersede the old procedure, and registrants can continue to rely on their existing orders until the end of the periods for which those orders provide confidential treatment.
However, registrants who wish to redact confidential terms from agreements to be filed as exhibits in the foreseeable future (or to extend the period of confidential treatment for previously filed agreements) should consider filing (or refiling) those exhibits using the new procedure.
Required Links to Exhibits and HTML Format
The Amendments generally require that:
- a filing’s exhibit list provide an active link to each electronically filed exhibit listed there,
- for exhibits that are incorporated into the filing by reference, the link be an active hyperlink to where the exhibit appears in the SEC’s “EDGAR” system, and
- the filing be in HTML format (as opposed to ASCII format).
Registered investment companies, unlike most other registrants, have not previously been subject to these requirements.
Therefore, to provide adequate time to comply, the exhibit link and HTML requirements apply to registered investment companies only as to filings made on or after April 1, 2020. Other types of registrants may already be subject to such those requirements, however, and no registrant is prohibited from complying with these requirements immediately.
The SEC’s adopting release notes that an inaccurate hyperlink alone would not render a filing materially deficient, so that such an inaccuracy would not necessarily have to be corrected immediately. For example, although an inaccurate hyperlink in a registered investment company registration statement that has not yet become effective must be corrected in a pre-effective amendment, if such a registration statement is already effective, an inaccurate link generally can be corrected in the next post-effective amendment that is filed.
Incorporation of Information by Reference into Financial Statements
The Amendments contain a new prohibition against incorporation of material into the financial statements by reference or by other cross-reference to sources outside the financial statements. Specifically, such incorporation or cross-references are prohibited, unless required or permitted by the SEC’s rules, U.S. Generally Accepted Accounting Principles, or International Financial Reporting Standards as issued by the International Accounting Standards Board. This prohibition is effective May 2, 2019.
Non-Material Attachments/Schedules to Exhibits
Under the Amendments, non-material attachments or schedules generally may be omitted from exhibits filed with the SEC, provided that the exhibit or accompanying text identifies the nature of the omitted material. This change is effective May 2, 2019.
This brief summary is not exhaustive, and many Amendments adopted by the release are relevant to SEC registrants other than those specifically referred to in this message. Therefore, all SEC registrants should carefully review the full release in order to evaluate the Amendments’ impact in their particular circumstances.
©2019 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.