This section applies to an advertisement or other sales material with respect to the securities of an investment company.
Availability of Additional Information
An advertisement must include a statement that:
- Advises an investor to consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing; explains that the prospectus contains this and other information about the investment company; identifies a source from which an investor may obtain a prospectus and states that the prospectus should be read carefully before investing; or
- If used with a profile, advises an investor to consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing; explains that the accompanying profile contains this and other information about the investment company; describes the procedures for investing in the investment company; and indicates the availability of the investment company's prospectus.
Advertisements Including Performance Data
An advertisement that includes performance data of an open-end management investment company or a separate account must include a legend with the following disclosures:
- That performance data quoted represents past performance only
- That past performance does not guarantee future results
- That investment return and principal value of an investment will fluctuate, therefore, when redeemed, may be worth more or less than original cost
- That current performance may be higher or lower than data quoted
The legend should also identify either a toll-free (or collect) telephone number or a website where an investor may obtain performance data current to the most recent month end, unless the advertisement includes total return quotations current to the most recent month, which must have ended seven business days prior to the date of use.
Special Rules for Money Market Funds
An advertisement for a money market fund may omit the disclosure about principal value fluctuation. However, money market funds must also include a disclaimer on all advertising stating that "an investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund." A money market fund that does not hold itself out as maintaining a stable net asset value may omit the second sentence of this statement.
If the yield of a money market is quoted, it must be calculated based on a seven-day period, and the end date and period covered must be displayed. Both current yield and annualized yield may be reported as long as the base periods are the same.
For funds other than money market funds, yields must be calculated based on a 30-day period. For tax-exempt funds, tax equivalent yield reporting must be accompanied by a disclosure of the tax rate assumed in the calculations.
Total return calculations must be presented in a format that includes one-, five- and ten-year periods (or fund existence, if less than ten years). The total return calculations must include the impact of sales charges and assume reinvestment of both capital gains and dividend distributions.
Investment Company Act of 1940, and FINRA Conduct Rule 2110 and 2120
Small BusinessHere's what the corporations with some of the biggest advertising budgets in the U.S. spend their money on.
InvestingThe Security and Exchange Commission (SEC) requires that any company raising money from potential investors through the sale of securities must file a prospectus with the SEC and then provide ...
Small BusinessUnderstand what programmatic advertising is as well as the technology that drives it. Learn about the top four ways programmatic advertising is changing media.
InvestingThis investment provides security, but its returns may not be adequate for long-term investors.
InvestingLearn information on some of the most promising money market mutual funds for investors to consider adding to their portfolio in 2016.
InvestingLearn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
InvestingLearn how to evaluate mutual funds and find the right one for you.
InvestingRelying on an investment's past performance to guide your investment decisions is a losing strategy. Find out why.
Small BusinessWe list five outlets where advertisers are spending their money, and how these trends developed.