On January 13, the Securities and Exchange Commission issued a release setting forth the adoption of amendments to Form N-1A and new measures for the satisfaction of prospectus delivery obligations by mutual funds and exchange-traded funds. The amendments to Form N-1A, the form used by open-end investment companies to register under the Investment Company Act of 1940 and to offer securities under the Securities Act of 1933, are intended to enhance disclosures provided to investors.  

Under the rule changes, mutual funds and exchange-traded funds must provide at the front of their prospectus a summary that incorporates key facts in plain English and a clear and concise format. This summary will include information on investment objectives and strategies, risks, costs and performance. For prospectuses detailing several funds in a fund complex, summary sections must be separate for and specific to each fund.  

The SEC also amended certain disclosure requirements specific to exchange-traded funds. In particular, disclosure requirements with respect to creation and redemption units have been reduced and replaced with a greater emphasis on secondary sale transactions so as to avoid confusion among investors who typically trade only in the secondary market. An exchange-traded fund must also disclose either in the prospectus or on an Internet website information on premiums and discounts in trading.  

Under the new disclosure framework, the SEC will permit funds to satisfy the obligation to provide investors with a prospectus by delivering a summary prospectus while posting the statutory prospectus on an Internet website. Funds selecting the new delivery option must still provide investors with a statutory prospectus on request.  

New fund registration statements must comply with the amended disclosure requirements on January 1, 2010. Current funds must amend their registration statements to comply no later than January 1, 2011. A fund may, at its option, prepare documents in accordance with the new requirements at any time after March 1, 2009, the effective date of the amendments. As an incentive to early compliance, a fund may rely on the new option to satisfy prospectus delivery upon implementing the amended disclosures.