In a speech at the SIFMA Complex Products Forum on October 29, 2014, Norm Champ, the Director of the SEC’s Division of Investment Management, discussed the Division’s views regarding the accuracy and completeness of alternative mutual fund prospectus disclosures. Mr. Champ acknowledged the “challenge” involved in writing clear, concise disclosure about the complex investment strategies used by alternative mutual funds and the risks associated with such strategies. He stated that prospectus disclosures should be tailored to address the alternative investment strategies that a fund expects to be the primary means for achieving its investment objectives and that will have significant effects on its performance. He stated that a fund should focus on the degree of economic exposure an alternative investment strategy creates, in addition to the amount invested in that strategy. With respect to risk disclosures, Mr. Champ explained the staff’s view that such disclosures should provide a “complete risk profile of the fund’s investments taken as a whole.” He suggested that a fund should disclose material risks relating to volatility, leverage, liquidity and counterparty creditworthiness that are associated with alternative investment strategies. Finally, Mr. Champ expressed the staff’s concern that there may be a disconnect between an alternative mutual fund’s strategies and risks disclosed in its prospectus and the strategies actually employed by the fund. He noted the staff’s belief that a fund should assess, in conjunction with its annual registration statement update, the accuracy and completeness of its disclosures in light of its actual operations. Mr. Champ also reported that the staff has been reviewing data to compare the actual use of alternative investment strategies by a fund with the disclosures in its prospectus.

The full text of Mr. Champ’s remarks can be found at: