Reporting requirements, Investment Company Act of 1940

mcq

Today in their SEC filings all mutual funds report fund performance relative to a benchmark, historically the S&P 500 or a total market index. But was it always that way?

General reporting requirements date to the 1940 Act. Did that act explicitly specify comparison of fund performance to a benchmark, or did that habit begin later? Easy to imagine the marketing department at some fund on a hot streak coming up with the bright idea to show how much the fund outperformed. Also easy to imagine that comparison to a benchmark was something that John Bogle started doing in the 1960s or 1970s, to suit his purposes.

OTOH, the SEC report that laid the foundation for the 1940 Act benchmarked fund performance against the Standard Statistics index. So maybe it is in the Act.

Anybody know? Or anybody have a mutual fund annual report from the 1940s, 1950s, 1960s? I’d love to know whether a benchmark was customary in fund reports even back then.

yogibearbull

Funds follow the current SEC Form N-1A that has been revised over the years. This Form includes what the SEC thinks should be included by the funds now and probably doesn't include anything that would violate/contradict the letter or spirit of the ICA 1940.
https://www.sec.gov/about/forms/formn-1a.pdf

ProtonAnalyst33

I thought this was required, or if not required, standard in the industry. No?

mcq

That was very helpful, yogibearbull (gives new meaning to the phrase "regulatory burden"). It makes clear that at present, a comparison of fund performance to a broad-based index is an SEC requirement. I wasn't sure.

But this version of the form mentions exchange traded funds, hence, can't be too old. Do you happen to know whether an agency like the SEC would keep a trailing history of the text of prior versions of a key form like N-1A? Or would those be buried in some paper archive, like pre-1994 EDGAR submissions, and only apparent by unearthing an old 1950 filing for some fund?

yogibearbull said:

Funds follow the current SEC Form N-1A that has been revised over the years. This Form includes what the SEC thinks should be included by the funds now and probably doesn't include anything that would violate/contradict the letter or spirit of the ICA 1940.
https://www.sec.gov/about/forms/formn-1a.pdf

yogibearbull

@mcq, I have the SEC Form N-1A link bookmarked and the same link has been working for YEARS. The Form just keeps getting revised and updated. I didn't bother to save paper copies of the older versions. May be the SEC can provide older versions on request.

There are Laws/Acts and then the regulatory agencies are charged with preparing the implementation materials. I think that this Form falls in that category. There is lots of stuff in there now that didn't even exist at the time of the ICA 1940 but funds just follow whatever the Form requires now.

mcq

Good news: Jason Zweig answered my question (without being asked). In his column this weekend (see other MFO thread ongoing) he gives a live link to the January 1990 Federal Register, which is when the SEC proposed the use of a broad index as part of Form N-1A.
That's when the requirement started--somewhat later than my guess