In a move to improve trust and accountability in the financial markets, the U.S. Securities and Exchange Commission (SEC) made a pivotal decision this week to amplify investor transparency. The package – approved three votes to two – will offer greater transparency for investors ranging from pension funds and universities to wealthy individuals, both on the performance of the funds and the deals the fund has with each investor. 


Transparency for investors

The SEC’s recent decision entails a series of obligations that investment funds must adhere to, aimed at providing investors with comprehensive and easily accessible information. This includes providing quarterly performance reports using standardised metrics that make it easier to compare funds, and increased disclosure on expenses. It will also oblige funds to increase disclosure on fees and preferential deals offered to some investors (although it won’t go so far as to ban these deals). 

Funds will also need to disclose their valuation methods, offering investors insight into how their fund’s net asset value (NAV) is calculated, and provide information on the liquidity of their assets which will help investors to understand the potential liquidity risks and the fund’s ability to meet redemption requests. 


Considerations for fund managers

Implementing these regulations will require coordination, technological upgrades, and adjustments to how they market to and communicate with investors and prospects. Investment firms will need to adopt systems that facilitate real-time reporting and comprehensive information exchange. Likewise, investors will need to familiarise themselves with the new data available to them and develop the skills to interpret and utilise this information effectively. 

The overall goal is to redress the balance of transparency , so the investor has access to more information held by the fund manager. Fund managers must consider how they will present this information, to ensure compliance with the SEC’s rules without compromising the investor journey. A fund marketing and investor relations solution (such as Edgefolio’s FundPortal) lets fund managers deliver the information they wish to – or must – present, directly to the investor. This allows transparency to be delivered with a self-service model, where the fund manager sets a permission level (which can be adjusted throughout the investor lifecycle) and the investor can access the appropriate information on demand. They will always be able to see accurate and up-to-date information and from a regulatory perspective disclosures are themselves fully transparent and highly automated.   



This isn’t the first time regulators have moved to increase transparency to investors, and fund managers should consider not only the information they must now share, but how they will share it. Investors value transparency, and if accessing and interpreting information is challenging, this may represent a competitive disadvantage for the fund manager. Funds would be wise to look for a solid technology solution that turns obligation into a competitive advantage.