About
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Careers
Why Cohen & Co Our Culture Total Rewards & Benefits Early Career Opportunities Experienced Opportunities Join Our Talent Community
Contact
Akron, OH Baltimore, MD Buffalo, NY Chicago, IL Cleveland, OH Deer Park, IL Denver, CO Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Services Industries Knowledge Center People

About Our Services

We offer tailored solutions — whether private company or owner; public or private fund, adviser or fund service provider; or Fortune 1000 enterprise. Learn how we can help you.

Find Services

Assurance Services

Employee Benefit Plan Audits Internal Controls Investment Company Audits Private Company Audits

Tax Services

Federal Tax Planning & Compliance High Net Worth & Wealth Transfer International Filings & Structuring Investment Company Tax State & Local Tax Tax Credits & Incentives Transaction Tax Planning

Advisory Services

Business Valuations Data & Insights Digital Finance Solutions IT Strategy & Implementation Litigation Support Services M&A Advisory Outsourced Accounting Solutions Transaction Services Turnaround & Restructuring

Our Industry Expertise

Our industry experience means you can find professionals who speak your language and bring earned insights to the table. Learn how we can help you.

Explore Industries

Key Industries

Digital Assets Investment Companies Manufacturing Private Companies Private Equity Real Estate & Construction Technology & Life Science
VIEW THE COMPLETE LIST

Knowledge Center

Our team wants to help your team stay up to date. Browse our thought leadership, events and news for insights and a point of view on business-critical topics.

Find Insights & Events

Insights

Browse valuable articles and publications our experts have written to help you and your organization answer key questions — and consider new ones.

Read Our Insights

Events

Join us in person and online for events that address timely topics and key business considerations.

Explore Our Events

News

Find out what is happening at Cohen & Co, from industry recognitions and growth updates, to where we are contributing to important media stories.

Read Our News
People
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Why Cohen & Co Our Culture Total Rewards & Benefits Early Career Opportunities Experienced Opportunities Join Our Talent Community
Akron, OH Baltimore, MD Buffalo, NY Chicago, IL Cleveland, OH Deer Park, IL Denver, CO Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Back to Insights

Investment Industry Wire | December 2022

by Julie Lowry

December 14, 2022 Investment Company Audits, Investment Companies

The pace and intricacies of regulatory change in the investment industry are, at times, nothing short of overwhelming. Yet, organizations in this space need to have a clear understanding of evolving regulations, their timing and overall impact. 

To help you stay up to date, below is Cohen & Co’s quarterly recap of the latest developments at a variety of regulatory agencies likely to impact our clients.

PCAOB

Spotlight Issued for Auditors and Audit Committees

In August, the PCAOB issued a spotlight that serves as a resource for audit committee members to consider as they continue their ongoing engagement and discussion with their auditors. This resource outlines questions in various areas, including fraud and other risks, audit execution, auditor independence, IPOs and mergers and acquisitions, audit firms’ quality control systems and technology.  

Read the full spotlight.

Impact: While the spotlight was directed to conversations between audit committees and auditors, committees should also address many of the topics with management to further their understanding of how these items impact the financial reporting process and related internal controls.

SEC

Adoption of Amendments to Modernize Fund Shareholder Reports and Improve Transparency in Fund Advertisements

In late October, the SEC issued a final rule that changes the way mutual funds and ETFs report to their shareholders. The new requirements add a layered approach, requiring “concise and visually engaging” semi-annual and annual shareholder reports.  

Every fund will be required to produce an individual shareholder report that contains the following, among other items:  

  • Fund name and class
  • Ticker symbol
  • Statement of material changes
  • Expense example
  • Management’s discussion of fund performance 
  • Fund statistics, including net assets, total number of portfolio holdings, portfolio turnover and total advisory fees paid

Furthermore, the report described above will need to be produced for each unique fund in a fund family (each series of a registrant is required to report separately) and for each share class individually.

Other amendments within the new rule include:

  • Historical information included within the NCSR filings is still required and will be filed with the SEC, as well as available electronically. In addition, open-end funds will now be required to tag the information using Inline eXtensible Business Reporting Language (XBRL).
  • Open-end funds are now mandated to mail paper copies of shareholder reports to investors, unless the investor has consented to electronic delivery.
  • All fee and expense information in advertisements must be consistent with the expense information provided in the prospectus fee table.

The rule becomes effective 60 days after being published in the federal register. However, for most of the requirements, funds will have 18 months from the effective date to become compliant.

Read the full rule.

Impact: This rule has been two years in the making and substantially changes the content and volume of shareholder reporting. The goal is to allow retail shareholders to better understand and compare the performance of their various fund investments.

Proposed New Oversight Requirements for Certain Services Outsourced by Investment Advisers

Also in October, the SEC issued a proposal that would require investment advisers to perform a minimum amount of due diligence on potential vendors before hiring them to perform certain services.  In addition to the requirement to perform initial due diligence, if made effective, the proposal would also require advisers to perform ongoing due diligence to help ensure vendors are meeting certain performance standards.

Covered services under the proposal are defined as those that:

  • Are necessary to provide advisory services in compliance with federal securities laws; and
  • If not performed (or performed negligently), would be reasonably likely to cause a material negative impact on the adviser’s clients or on the adviser’s ability to provide investment advisory services.

Clerical, ministerial, utility and general office functions are types of services specifically excluded in the proposal.

The comment period for the proposal is open through December 27, 2022.

Read the full proposal.

Impact: While there are many operational reasons an investment adviser would outsource services, there is a risk that investors could be harmed in doing so. This proposal seeks to reduce that risk by requiring advisers to perform a reasonable amount of diligence prior to engaging outside vendors. It is likely that many advisers are already complying with such requirements, and, therefore, this proposal would not have a significant impact on their business.

Proposed Enhancements to Open-End Fund Liquidity Framework

Most open-end mutual funds are required to classify their investments into four categories, based on the underlying liquidity of each issuance. In early November, the SEC proposed amendments to its liquidity reporting rules, with the goal of enhancing liquidity classifications by requiring minimum standards to be used in the analysis. The SEC hopes that implementing these rules will protect investors in stressed market conditions by providing more transparency in liquidity reporting.

Also included in the proposed amendments is the required use of swing pricing. Swing pricing is a mechanism through which a fund would adjust its NAV per share so the costs a fund incurs in meeting subscription and redemption requests would be passed on to the shareholders engaged in that activity.  To help ensure operational feasibility of swing pricing, the commission also included the requirement of a “hard close” in the proposed amendments, allowing funds to only accept shareholder orders until the timing of that fund’s daily pricing (typically 4 p.m. EST).

The comment period for the proposal is open for 60 days after publication in the federal register.

Read the full proposal.

Impact: The proposal stems from investor response and market volatility at the onset of the COVID 19 pandemic. While there will always be, in most cases, an inherent mismatch in structural liquidity of a fund and potential shareholder redemptions, the proposal aims to minimize those instances and provide more protection for investors. Similarly, the swing pricing amendments use proposed cost apportionment to protect investors who elect to remain in a fund. Both proposals seem to carry a somewhat significant increased burden to fund administrators.

Contact Julie Lowry at jlowry@cohenco.com or a member of your service team to discuss this topic further.

Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.

About the Author

Julie Lowry, CPA

Partner, Cohen & Co Advisory, LLC
Partner, Cohen & Company, Ltd.
jlowry@cohenco.com
216.649.5720
Article

Investment Industry Wire | September 2022

Read More
Article

Investment Industry Wire | June 2022

Read More
Article

Investment Industry Wire | March 2022

Read More
Sign Up for Our Investment Industry Services Newsletter

Receive insights from our team of investment industry services specialists directly to your inbox as they go live in our online Knowledge Center.

Subscribe Today
Top
Subscribe to our newsletter
About Contact Submit RFP Privacy Policy

"Cohen & Co" is the brand name under which Cohen & Company, Ltd. and Cohen & Co Advisory, LLC, and its subsidiary entities, provide professional services.

Cohen & Company, Ltd. and Cohen & Co Advisory, LLC practice in an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards.

Cohen & Company, Ltd. is a licensed independent CPA firm that provides attest services to its clients. Cohen & Co Advisory, LLC and its subsidiary entities provide tax, advisory and business consulting services to their clients and are not licensed CPA firms.

The entities operating under the Cohen & Co brand are independently owned and are not responsible for the services provided by any other entity operating under the Cohen & Co brand. Our use of terms such as “our firm,” “we,” “us” and other terms of similar import denote the alternative practice structure of Cohen & Company, Ltd. and Cohen & Co Advisory, LLC.

© 2025 Cohen & Co