What Is SEC Form 497?
SEC Form 497 is one of the key forms for compliance officers and legal advisors within the investment fund industry, used to declare so-called definitive materials to the SEC, as required for regulatory purposes. “Definitive materials” in this case refers to any information that is relevant to an investor’s decision about whether to invest in a fund. This includes information such as prospectuses and their supplements. Other filings (such as a quarterly report or annual report) are submitted on different SEC forms.
SEC Form 497 gets its name from the specific provision of the Securities Act with which it correlates, which is Rule 497.
For mutual funds and other types of investment funds, investment companies must make a prospectus publication filing to satisfy the SEC Form 497 regulation. These companies must also provide updated disclosures after the filing of the initial registration statement, so that potential investors have access to the most updated information regarding the fund’s holdings, strategies, and management.
Who Files SEC Form 497?
Do all investment funds need to file Form 497, or are there exceptions for some funds? Management investment companies are required to file this form, including:
• Mutual funds
• Exchange-traded funds (ETFs)
• Unit investment trusts (UITs)
• Variable annuity and life insurance contracts
Private funds that are only offered to a small pool of investors do not need to file Form 497, nor do publicly traded companies.
Types of 497 Filings
Form 497 is required anytime a fund provides investors with a final prospectus, amended or supplemental information. While this is simple enough to grasp, the SEC has several types of 497 filings that reflect different types of investor material updates.
Before funds can file this form and satisfy regulatory requirements, they must understand which type of 497 filing to make. This list breaks down the different types of filing designations, and the product or material they are intended to cover:
- For variable annuity contracts, use the 497VPI / 497VPU designation
- For a summary prospectus, as per Rule 498, use the 497K designation
- To certify that no changes have been made to the Statement of Additional Information (SAI) or the prospectus, use the 497J designation
- For all other 497 filing needs not covered by the above designations, select the 497 (Plain) designation
SEC Form 497 Reporting Requirements
Form 497 contains a number of required fields that must be completed. To help investment companies plan and prepare their filing strategy, let’s review what type of information is typically contained within a 497 form.
- Fees and expenses: The company must disclose fees and expenses, including updated fee rates.
- Investment objectives and strategies: The company must explain its objectives and strategies using plain language.
- Risks and performance updates: The company must provide updated information about the fund performance and relative risk, similar to that found on a financial statement.
- Management team and portfolio managers: The company must identify the names of management personnel, including portfolio managers.
- Purchase and redemption procedures: The company must explain how an investor can buy or sell shares.
- Legal or structural changes to the fund: If the structure of the fund has changed, the nature of these changes must be spelled out.
- Any material changes to previously filed Form N-1A or N-4 content: If there have been changes to a fund’s initial registration statement or to the variable annuity contracts a company offers, the 497 filing must explain the relevant material changes.
Filing Compliance and Timeline
As previously mentioned, the issuer must file Form 497 with the SEC using the SEC’s proprietary EDGAR system. The form must be filled out accurately and filed within five business days of the issuance of the definitive materials. The SEC requires certain conventions with all paperwork, including the use of EDGAR-specific formatting.
Late and inaccurate filings can cause trouble for issuers, so let’s review some of the most common errors made on a Form 497 filing.
The SEC does not tolerate late filings, which is defined as a filing that comes in after the five-day window. An SEC filing calendar can help issuers keep track of relevant filings and deadlines to avoid a late or missed filing.
Another common issue is using the wrong form variation, such as using the 497 Plain when a different variation should have been used instead. On a similar note, filings that do not take into account the updated Rule 498A, which covers the summary prospectus for variable products, are considered inaccurate.
Lastly, EDGAR formatting is required. If the form is not formatted properly, or fails to meet another EDGAR filing regulation, there is a possible compliance issue.
Companies that do not comply with SEC regulations may be fined or face civil penalties. To avoid penalties, it is important to understand how to file a Form 497 and submit an accurate, complete form within the mandated five-day timeline.
Benefits of Accurate and Timely Filings
The best way to avoid getting in trouble with the SEC for noncompliance is to make accurate and timely SEC filings. Software products streamline this with an array of features that make filling out and transmitting forms easy. A few core features of special interest to asset managers and insurers are collaboration tools that allow team members to collaborate on reporting, XBRL tagging, and error checking to catch any errors or omissions before filing.
Legeraging a tool, such as DFIN ActiveDisclosure, offers support for all necessary SEC filings, including Form 497 and all its variations. Companies that trust DFIN for their SEC filing enjoy a faster, more efficient, and highly accurate solution, streamlining their workflow and making compliance easy. Learn more about the ActiveDisclosure difference.