SEC Amends Investment Company Advertising Rules


January 8, 2004


In September 2003, the Securities and Exchange Commission approved amendments to Rules 134 and 482 under the Securities Act of 1933 and Rule 34b-1 under the Investment Company Act of 1940, which establish new disclosure requirements for investment company communications including mutual fund, variable annuity, and variable life insurance sales material. This alert reminds members that they must re-file with NASD advertisements and sales literature that a member will continue to use and that have been materially changed in order to comply with the amendments to Rules 134, 482 and 34b-1.


The amendments eliminate the previous requirement that investment company sales material under Rule 482 contain only information the substance of which is in the investment company’s prospectus. The amendments to Rules 482 and 34b-1 require sales material to provide additional disclosure regarding investment objectives, risks and fees, and to present explanatory information more prominently. Sales material that includes performance data for mutual funds and variable annuities must include information about the most recent month-end performance and additional disclosure relating to past performance. The amendments also rescind the provisions of Rule 134 that apply specifically to investment companies


The amendment eliminating the “substance of which” requirement from Rule 482 took effect on November 15, 2003. Sales material submitted for publication after March 31, 2004, must comply with all other rule amendments, including the new disclosure and prominence requirements. Members should consult SEC Release No. 33-8294 (Sept. 29, 2003),, for more information.


Members that previously filed advertisements and sales literature with NASD and that intend to use these items after March 31, 2004, may need to make material changes to these items in order to comply with the Rule 482 and Rule 34b-1 amendments. For example, members may need to add new disclosures or performance information to sales material, or may need to make certain disclosures more prominent or closer to the presentation of performance information.


Members’ sales material also must meet the applicable requirements of NASD Rule 2210. Rule 2210(c) generally requires members to file advertisements and sales literature concerning registered investment companies within 10 business days of first use or publication. This requirement also applies to any advertisement or sales literature that a member previously filed if it has been materially changed since it was last filed. Accordingly, members will be required to re-file any advertisement or sales literature (including Web sites) concerning a registered investment company that the member previously filed but which the member materially changed in order to meet the new requirements of Rule 482 or Rule 34b-1.


Any questions regarding investment company communications may be directed to the Advertising Regulation Department staff at (240) 386-4500.