Fintech
SEC Proposes to Improve the Retail Investor Experience through Modernized Fund Shareholder Reports and Disclosures
Washington, D.C.–(Newsfile Corp. – August 5, 2020) – The Securities and Exchange Commission today proposed comprehensive modifications to the mutual fund and exchange-traded fund disclosure framework to better serve the needs of retail investors. The proposed disclosure framework would feature concise and visually engaging shareholder reports that would highlight information that is particularly important for retail investors to assess and monitor their fund investments. The proposal is a central component of the Commission’s investor experience initiative and responds to comments the Commission received in response to a 2018 request for comment on retail investors’ experience with fund disclosure.
“The Commission is committed to improving the Main Street investor experience and modernizing information content and delivery,” said SEC Chairman Jay Clayton. “By encouraging fund disclosures that use modern communication techniques to emphasize clearly and concisely the information investors find most useful, today’s proposal should facilitate better-informed decision making.”
The proposal would:
- require streamlined reports to shareholders that would include, among other things, fund expenses, performance, illustrations of holdings, and material fund changes;
- significantly revise the content of these items to better align disclosures with developments in the markets and investor expectations;
- encourage funds to use graphic or text features—such as tables, bullet lists, and question-and-answer formats—to promote effective communication; and
- promote a layered and comprehensive disclosure framework by continuing to make available online certain information that is currently required in shareholder reports but may be less relevant to retail shareholders generally.
The proposed framework would provide an alternative approach to keeping investors informed about their ongoing fund investments. Instead of receiving both prospectus updates and shareholder reports, which today can be lengthy and complex, existing investors would receive the streamlined shareholder report. This would provide investors with timely and concise information to effectively assess and monitor their fund investments. Information currently required in shareholder reports that is not included in the streamlined shareholder report would be available online, delivered free of charge upon request, and filed on a semi-annual basis with the Commission.
In addition, the proposal would amend prospectus disclosure requirements to provide greater clarity and more consistent information regarding fees, expenses, and principal risks. To improve fee- and expense-related information more broadly, the proposal would also amend investment company advertising rules to promote more transparent and balanced statements about investment costs. The proposed advertising rule amendments would affect all registered investment companies and business development companies.
The proposal will be published on SEC.gov and in the Federal Register. The public comment period will begin following publication on SEC.gov and remain open for 60 days after publication in the Federal Register.
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FACT SHEET
Tailored Shareholder Reports, Treatment of Annual Prospectus Updates for Existing Investors, and Improved Fee and Risk Disclosure for Mutual Funds and Exchange-Traded Funds; Fee Information in Investment Company Advertisements
August 5, 2020
Action
The Commission is proposing modifications to the disclosure framework for mutual funds and exchange-traded funds (“ETFs”) registered on Form N-1A (“open-end funds”) that would highlight key information for investors. The Commission is also proposing amendments to the advertising rules for registered investment companies and business development companies.
Highlights
Shareholder Reports Tailored to the Needs of Retail Shareholders
Based on feedback from investors and the Commission’s experience with fund disclosure, the proposed amendments affecting open-end funds’ shareholder reports are designed to highlight information that is particularly important for retail shareholders to assess and monitor their fund investments. This information would include, among other things, fund expenses, performance, illustrations of holdings, and material fund changes. The proposal would encourage open-end funds to use graphic or text features—such as tables, bullet lists, and question-and-answer formats—to promote effective communication. It would also provide flexibility for open-end funds to make electronic versions of their shareholder reports more user-friendly and interactive.
Availability of Additional Information on Form N-CSR and Online
Certain information currently included in an open-end fund’s annual and semi-annual reports may be less relevant to retail shareholders, and of more interest to financial professionals and those investors who desire more in-depth information. Under the proposal, this information would be available online, delivered free of charge upon request, and filed on a semi-annual basis with the Commission on Form N-CSR. This information would include, for example, the schedule of investments and other financial statement elements.
Tailoring Required Disclosures to Needs of New and Ongoing Fund Investors
Currently, open-end fund shareholders generally receive an updated annual prospectus each year. Proposed new rule 498B would provide an alternative approach to keep investors informed about their fund investment and any fund updates that occur year over year. Under this proposed rule, new investors would receive a fund prospectus in connection with their initial investment in an open-end fund, as they currently do, but funds would not deliver annual prospectus updates to shareholders thereafter. Instead, under the proposed layered disclosure framework, funds would keep shareholders informed through the shareholder report (including a summary in the annual report of material changes over the prior year), as well as timely notifications of material fund changes as they occur. Current versions of the fund’s prospectus would remain available online and would be delivered upon request in paper or electronically, consistent with the shareholder’s delivery preference.
Amendments to Scope of Rule 30e-3 to Exclude Open-End Funds
Under the existing framework, beginning as early as January 1, 2021, funds may begin relying on rule 30e-3. This rule generally permits funds to satisfy shareholder report transmission requirements by making these reports and other materials available online and providing a notice of the reports’ online availability, instead of directly providing the reports to shareholders. Investors who prefer to receive the full reports in paper may—at any time—choose that option free of charge.
Taking into account feedback from investors in response to the 2018 request for comment, and as part of the Commission’s continuing efforts to search for better ways of providing investors with disclosure they need, the proposal would amend the scope of rule 30e-3 to exclude open-end funds. The proposal would not affect the availability of rule 30e-3 for other registered management companies (such as registered closed-end funds) or registered unit investment trusts.
This amendment would help ensure that all open-end fund shareholders would experience the anticipated benefits of the proposal’s modified disclosure framework, which contemplates direct transmission of concise shareholder reports that serve as the central source of fund disclosure for existing shareholders. The proposed framework is designed to provide a more effective means for investors to access and use fund information, while continuing to recognize investor delivery preferences and reducing expenses associated with printing and mailing.
Improvements to Prospectus Disclosure of Fund Fees and Risks
The proposal would amend open-end fund prospectus disclosure to help investors more readily understand fund fees and risks, which investors have identified as two areas that are critically important in assessing a prospective fund investment, and yet often can be complex and confusing.
Using layered disclosure principles, the proposal would tailor disclosures of these topics to different types of investors’ informational needs. The proposal would, in part, (1) replace the existing fee table in the summary section of the statutory prospectus with a simplified fee summary, (2) move the existing fee table to the statutory prospectus, for use by investors seeking additional details about fund fees, and (3) replace certain terms in the current fee table with terms that may be clearer to investors.
The amendments also would refine current requirements for funds to disclose the “acquired fund fees and expenses” associated with investments in other funds. Specifically, the proposal would permit open-end funds that make limited investments in other funds to disclose the fees and expenses associated with those investments (“acquired fund fees and expenses”) in a footnote to the fee table and fee summary, rather than as a fee table line item.
The proposal would improve open-end fund prospectus risk disclosure by making it clearer and more specifically tailored to a fund. The proposal would, in part, (1) promote the disclosure of a fund’s principal risks, rather than additional, often overwhelming, disclosures about non-principal risks, and (2) tailor principal risk disclosure by specifying how principal risks can be assessed.
Fee and Expense Information in Investment Company Advertisements
The proposal would require that presentations of investment company fees and expenses in advertisements and sales literature are consistent with relevant prospectus fee table presentations and are reasonably current. The proposed amendments also address representations of fund fees and expenses that could be materially misleading. These amendments would affect all registered investment company and business development company advertisements.
What’s Next?
The proposal will be published on SEC.gov and in the Federal Register. The public comment period will begin following publication on SEC.gov and remain open for 60 days after publication in the Federal Register.
The Commission also approved for use two short-form feedback fliers to gather information from investors and funds, respectively. These feedback fliers are particularly directed at retail investors and smaller funds and are designed to help them provide feedback on the proposal. However, the Commission welcomes feedback from all interested commenters.
Fintech
Fintech Latvia Association Releases Fintech Pulse 2024: A Guide to Latvia’s Growing Fintech Hub
The Fintech Latvia Association has launched the latest edition of its annual publication, Fintech Pulse 2024, unveiling insights and resources that position Latvia as a thriving hub for European fintech.
Announced at this year’s Fintech Forum, the magazine is now available in digital format, offering a comprehensive guide for fintech professionals and entrepreneurs navigating the Latvian market and exploring its advantages.
This issue covers essential topics, from support tools provided by Latvijas Banka and newcomer roadmaps to Riga’s investor resources and fintech education opportunities. Readers will find the latest fintech news from Latvia, coverage of this year’s key industry events, and member insights on the future of fintech. The Fintech Landscape section provides a comprehensive overview of the Latvian fintech ecosystem.
Tina Lūse, Managing Director of Fintech Latvia Association, expressed excitement about the ecosystem’s growth: “We are excited to unveil the third annual edition of Fintech Pulse. This year has been pivotal for our ecosystem, and together with public sector stakeholders, we are enhancing financial inclusion, democratizing investments, and driving innovation throughout the sector. This is a testament to Latvia’s emergence as a fintech hub, establishing itself as an equal partner in innovation and support within the Baltic region.”
Minister of Finance Arvils Ašeradens highlighted Latvia’s fintech potential in the magazine, stating: “Latvia has already made strides in adapting its regulatory framework to support a stable financial system. Now, we encourage financial market players to invest in modern technologies to meet the growing demand for inclusive financial services and solidify Latvia’s position in the fintech landscape. We are confident that with the combined offer of the government, Latvijas Banka and Riga city, we are a great place to start your next scalable European FinTech!”
Minister of Economics Viktors Valainis expressed Latvia’s ambition in the magazine, stating: “Latvia wants to become a WEB 3.0. innovation hub and solidify itself as one of the leaders of a newly regulated EU crypto-asset market. We welcome international companies to choose Latvia, a flexible and fast-paced country, where you can obtain a MICA license in just 3 months. Open your office in Latvia, receive a MICA license and serve the whole EU market!”
The Fintech Latvia Association brings together fintech and non-banking financial service providers to represent their interests at both the national and international levels. It promotes sustainable development in Latvia’s financial sector by fostering reliable, responsible, and long-term industry practices that earn trust from consumers and regulatory authorities. The association is committed to supporting innovation and growth opportunities within the fintech landscape.
The post Fintech Latvia Association Releases Fintech Pulse 2024: A Guide to Latvia’s Growing Fintech Hub appeared first on News, Events, Advertising Options.
The World Economic Forum (WEF) has released a pivotal white paper in collaboration with the Financial Conduct Authority (FCA), titled “Quantum Security for the Financial Sector: Informing Global Regulatory Approaches”. This January 2024 publication underscores the urgent need for global cooperation as the financial sector transitions from a digital economy to a quantum economy, highlighting both the immense opportunities and cybersecurity challenges posed by quantum computing.
Quantum: A Double-Edged Sword for Finance
Quantum computing offers transformative benefits for the financial sector, such as accelerated portfolio optimization, enhanced fraud detection, and improved risk management. Yet, it simultaneously threatens the very foundation of cybersecurity. With quantum’s ability to break traditional encryption methods, sensitive data and financial transactions face significant risks. The white paper warns that such vulnerabilities could erode trust in the financial system and destabilize global markets.
The urgency to prepare is evident, with some quantum threats, such as “Harvest Now, Decrypt Later” attacks, already emerging. Governments and regulators, including the United States with its National Security Memorandum on Quantum (2022), have begun advocating for quantum security readiness by 2035. However, as noted in the paper, transitioning to a quantum-secure infrastructure is a monumental task requiring unprecedented coordination between regulators, industry leaders, and technology providers.
A Collaborative Framework: Four Guiding Principles
To address the complex challenges posed by quantum technologies, the WEF and FCA have proposed four guiding principles to inform global regulatory and industry approaches:
- Reuse and Repurpose: Leverage existing regulatory frameworks and tools to address quantum risks, rather than creating entirely new systems.
- Establish Non-Negotiables: Define baseline requirements for quantum security, ensuring consistency and interoperability across organizations and jurisdictions.
- Increase Transparency: Foster open communication between regulators and industry players to share best practices, strategies, and knowledge.
- Avoid Fragmentation: Prioritize global collaboration to harmonize regulatory efforts and avoid inconsistencies that could burden multinational organizations.
These principles aim to create a unified, forward-looking strategy that balances innovation with security.
A Four-Phase Roadmap for Quantum Security
The white paper introduces a phased roadmap to help the financial sector transition toward quantum security:
- Prepare: Raise awareness of quantum risks, assess cryptographic infrastructure, and build internal capabilities.
- Clarify: Formalize engagement between stakeholders, map current regulations, and model the cost and complexities of transitioning to quantum-safe systems.
- Guide: Address regulatory gaps, translate technical standards into actionable frameworks, and develop industry-wide best practices.
- Transition and Monitor: Implement cryptographic management modernization and adopt iterative, adaptable regulatory approaches to remain resilient in the quantum economy.
This roadmap emphasizes adaptability, encouraging stakeholders to continuously refine their strategies as quantum technologies evolve.
The Path Forward: Collaboration as a Catalyst
The transition to a quantum-secure financial sector is not merely a technological shift but a comprehensive rethinking of how industries and regulators approach cybersecurity. The interconnected nature of global finance means that collaboration between mature and emerging markets is crucial to avoid vulnerabilities that could undermine the entire system.
Regulators and financial institutions must act with urgency. As Sebastian Buckup, Head of Network and Partnerships at the World Economic Forum, notes in the report:
“The quantum economy era is fast approaching, and we need a global public-private approach to address the complexities it will introduce. We welcome this opportunity to collaborate with the FCA to chart the roadmap for a seamless and secure transition for the financial services sector.”
Similarly, Suman Ziaullah, Head of Technology, Resilience, and Cyber at the FCA, emphasizes:
“Quantum computing presents considerable opportunities but also threats. The financial sector relies heavily on encryption to protect sensitive information, the exposure of which could cause significant harm to consumers and markets. Addressing this requires a truly collaborative effort to transition to a quantum-secure future.”
Global Impact: Ensuring Resilience in an Evolving Landscape
As quantum technologies mature, they will redefine the landscape of cybersecurity. The financial sector, as one of the most sensitive and interconnected industries, must prioritize preparedness to ensure stability, protect consumers, and maintain trust.
The Quantum Security for the Financial Sector: Informing Global Regulatory Approaches white paper offers an essential foundation for continued dialogue and action. By adhering to the guiding principles and roadmap outlined in the report, stakeholders can navigate this transformation with foresight and cooperation.
The full report, published by the World Economic Forum, highlights the need for a unified global approach to quantum security, serving as a rallying call for industry and regulatory leaders alike.
Source: World Economic Forum, “Quantum Security for the Financial Sector: Informing Global Regulatory Approaches”, January 2024.
The post Quantum Security and the Financial Sector: Paving the Way for a Resilient Future appeared first on News, Events, Advertising Options.
The fintech landscape continues to redefine itself, driven by innovation, partnerships, and groundbreaking strategies. Today’s roundup focuses on the latest digital wallet offerings, evolving payment trends, strategic collaborations, and notable funding achievements. This editorial explores the broader implications of these developments, casting light on how they shape the future of fintech and beyond.
Beacon’s Digital Wallet for Immigrants: A Gateway to Financial Inclusion
Beacon Financial, a leading player in financial technology, recently launched a digital wallet tailored to meet the unique needs of immigrants moving to Canada. This offering bridges a critical gap, enabling seamless financial integration for newcomers navigating a foreign system.
By combining intuitive technology with user-centric features, Beacon aims to empower immigrants with tools for payments, savings, and remittances. This aligns with the growing demand for tailored financial products that resonate with specific demographics.
Op-Ed Insight:
Financial inclusion is more than just a buzzword; it’s a moral imperative in the fintech space. Products like Beacon’s digital wallet highlight the industry’s potential to create tangible change. As global migration trends increase, such offerings could inspire similar initiatives worldwide.
Source: Fintech Futures.
Juniper Research Highlights 2025’s Payment Trends
Juniper Research’s latest report unveils pivotal payment trends poised to dominate in 2025. Central themes include the adoption of instant payment networks, a surge in embedded finance solutions, and the rise of crypto-backed financial products.
The research underscores the rapid adoption of real-time payment systems, fueled by increasing consumer demand for speed and efficiency. Meanwhile, embedded finance promises to blur the lines between traditional banking and non-financial services, delivering personalized and context-specific solutions.
Op-Ed Insight:
As the lines between financial services and technology continue to blur, these trends emphasize the industry’s shift toward convenience and personalization. The growing role of crypto-based solutions reflects an evolving consumer mindset, where decentralization and digital-first experiences gain precedence.
Source: Juniper Research.
MeaWallet and Integrated Finance Partner to Revolutionize Digital Wallets
MeaWallet, a prominent fintech solutions provider, has partnered with Integrated Finance to advance digital wallet capabilities and secure card data access for fintech companies. This collaboration focuses on empowering fintechs to deliver better, safer digital payment experiences.
MeaWallet’s role as a technology enabler aligns seamlessly with Integrated Finance’s goal of simplifying complex financial infrastructures. Together, they aim to create scalable, robust platforms for secure payment solutions.
Op-Ed Insight:
Partnerships like this underscore the importance of collaboration in driving innovation. As security concerns grow in tandem with digital payment adoption, solutions addressing these challenges are essential for maintaining consumer trust. The fintech ecosystem thrives when synergy and innovation coalesce.
Source: MeaWallet News.
Nucleus Security Among Deloitte’s Fastest-Growing Companies
Nucleus Security has achieved a remarkable milestone, ranking 85th on Deloitte’s 2024 Technology Fast 500 list. This achievement is attributed to its robust cybersecurity solutions, which cater to the increasingly digital fintech environment.
With cyberattacks becoming more sophisticated, fintech companies are under immense pressure to safeguard their platforms. Nucleus Security’s growth reflects the rising demand for comprehensive, scalable security solutions that protect sensitive financial data.
Op-Ed Insight:
In a digital-first world, robust cybersecurity isn’t optional—it’s fundamental. The recognition of companies like Nucleus Security signals the growing importance of protecting fintech infrastructure as the industry scales globally.
Source: PR Newswire.
OpenYield Secures Funding to Transform the Bond Market
OpenYield has announced a successful funding round, aiming to revolutionize the bond market through innovative technology. The platform promises greater transparency, efficiency, and accessibility in fixed-income investments.
This funding underscores the growing appetite for digitizing traditionally opaque financial markets. By leveraging cutting-edge technology, OpenYield seeks to democratize bond investments, making them accessible to a broader audience.
Op-Ed Insight:
The bond market, long viewed as complex and inaccessible, is ripe for disruption. OpenYield’s efforts to modernize this space highlight fintech’s transformative potential to democratize finance and empower individual investors.
Source: PR Newswire.
Key Takeaways: Shaping the Future of Fintech
Today’s developments underscore several critical themes in the fintech landscape:
- Personalization and Inclusion: Products like Beacon’s wallet highlight the importance of understanding and addressing specific user needs.
- Collaborative Ecosystems: Partnerships, like that of MeaWallet and Integrated Finance, emphasize the power of collaboration in solving industry challenges.
- Emerging Technologies: Juniper Research’s predictions affirm the continued influence of blockchain, embedded finance, and instant payment networks.
- Security at the Core: The recognition of Nucleus Security underscores the essential role of cybersecurity in fintech.
- Market Transformation: OpenYield’s funding signifies the ongoing disruption of traditional financial markets, paving the way for broader accessibility.
The post Fintech Pulse: Daily Industry Brief – A Dive into Today’s Emerging Trends and Innovations appeared first on News, Events, Advertising Options.
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