The Staff of the SEC’s Division of Investment Management issued IM Guidance Update 2013-12 in which the Staff “encourages investment advisers and funds’ boards of directors to carefully evaluate any fund name that suggests safety or protection from loss and to consider whether a name change is appropriate to address any potential for investor misunderstanding.” The IM Guidance Update reflects the Staff’s determination to “object to names that may create an impression of protection or safety or absence of risk of loss, where the name does not include qualifying language that defines the scope and limits of such protection.” As a consequence, during the disclosure review process, the Staff has requested that some existing and new funds change their names. The Staff’s concerns articulated in the IM Guidance Update focus on two particular types of funds that include “protected” in their names:
The IM Guidance notes that the Staff has requested name changes in situations where a fund’s prospectus explains limitations on loss protection not reflected in the fund’s name because the Staff believes that ”in practice, investors sometimes focus on a fund’s name to determine the fund’s investments and risks, either because the name sometimes appears without the clarifying prospectus disclosures (e.g., in advertisements) or because of the prominence of a fund’s name or for other reasons.”
For more information about the contents of this alert, please contact:
Elizabeth Shea Fries
Consumer Financial Services
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