SEC instructs CFOs
February 1, 1999
The most important issue addressed in this year's SEC letter to CFO's is the requirement that funds include in their reporting of revenue, payments, in cash or kind, they receive from broker/dealers for sending them business. The letter also reminded CFOs of the requirement that funds update their performance bar chart information to reflect the most recent quarterly or year-end performance, said Kenneth Domingues, chief accountant of the SEC's Division of Investment Management.
The SEC concluded from a survey of broker/dealer payments to fund companies, presented in September, that there were misunderstandings within the industry about how to report these payments, Domingues said. The Dear CFO letter reminds advisers that they must report these payments even if these amounts are not considered to be "material."
Domingues also reminded advisers that they must use in the prospectus' performance bar chart and footnote the most up-to-date quarter or year-end data even if fund document filing dates make that difficult.
He also clarified how advisers must notify shareholders when there is a change in accountants. Besides requiring advisers to report this change on Forms N-SAR, N-1A and N-2, the SEC suggested funds explain the change in the standard discussion of a fund's performance.