Mutual Funds, ETFs, and Separate Accounts are very similar; however, they each have their own set of unique characteristics. Regardless of them having their own differences, many of the SEC-required filings overlap between each of the groups.
Mutual Funds are both actively and passively managed pools of assets that are collected using the shareholder’s invested funds. Mutual funds are controlled by professional money managers who fully control the placement of the funds’ money, specifically what securities, bonds, and other financial instruments it places its money in. Often the fund’s investments are highly diversified among industries and investment types.
The ultimate goal of mutual funds is to utilize the current amount in the fund and increase the total portfolio for the benefit of the shareholders. Shareholders can either be large or small investors because mutual funds are known for a high level of participation. A defining characteristic of mutual funds is that they cannot be traded on any stock exchanges and instead can only be bought and sold at the end of the trading day directly to the financial managing company.
Exchange-traded funds, also known as ETFs, are almost identical to mutual funds except for one key distinction: ETFs can be publicly traded on stock exchanges. Because ETFs are traded on stock exchanges they tend to have a higher level of liquidity and tend to be more cost effective compared to mutual funds.
Similar to Mutual Funds, ETFs have a portfolio made up of a wide array of investments including stocks, bonds, and commodities as well as being actively managed. Compared to Mutual Funds, tend to be less popular, but the gap between the 2 funds is shrinking every year.
A separate account is a personally owned investment portfolio. Unlike with ETFs and Mutual Funds, an investor would not be buying part of an account made of a portion of different stocks, bonds, and commodities; instead, separate accounts are made up of whole stocks, bonds, and commodities that an investor would purchase. Every entity included within the separate account is owned directly by the investor.
A separate account provides the investor a higher level of control because they are in command of what stock, bonds, and commodities are included in their portfolio and at what quantity, which is very different from ETFs and Mutual Funds where a professional management company decides.
The required SEC filings for Mutual Funds and ETFs are almost completely identical, with a few exceptions. Since the only difference between the 2 is the availability to be publicly listed and traded, many of the filings overlap. Due to a separate account being very similar to a Mutual Fund and an ETF, but instead being individually owned, there is a small overlap in filings between the 3 groups, but not as much as between Mutual Funds and ETFs.
Listed below are the typical SEC filings that both Mutual Funds and ETFs are required to file.
1. Form N-1A or Registration Form
This form is required to be filed by financial management companies in order to register both open-ended mutual funds and open-ended ETFs. Form N-1A is only available to be filed online to EDGAR and must receive approval from the SEC before any shares of mutual funds or ETFs are available to the public. The SEC requires that this form be updated annually to make sure that all the information included about the funds is up to date and correct.
The Registration Form is very comprehensive and requires that the management company filing includes a prospectus that discusses the investments’ objective, fees, risks, performance, management details, principal investment strategies, organization, and distributions. The form must also include a “Statement of Additional Information” which discusses the company’s members of the management team, portfolio managers, and the fund’s financial statements.
It typically takes up to 60 days for the SEC to respond and provide initial approval with some financial management companies never receiving approval for its desired Mutual Fund or ETF.
2. Form N-CSR or Certified Shareholder Report
The Form N-CSR is a form that fund management companies must file with the SEC within 10 days of providing the shareholders with the semi-annual and annual reports.
The form must include a copy of the shareholder reports, the company’s code of ethics, the name of the financial advisor who watches over the company’s auditing committee, accountant fees, the fund’s holdings, and the proxy voting policies. The main purpose of this form is to keep shareholders updated on the fund’s condition as well as to answer any questions or concerns that may have arisen within the months prior to its release.
Since this form includes the fund’s 10-K and 10-Q, it is very beneficial for potential investors to analyze because of its ability to display changes in the fund’s performance from year to year and quarter to quarter.
3. Form N-PX or Annual Report of Proxy Voting Record
The Proxy Voting Record is required by the SEC so that investors may be aware of the proxy votes and procedures. It provides information about how the proxy votes have impacted the types and amounts of securities that the fund holds. The form allows potential fund holders to learn about specific companies’ proxy voting rules and designations. Form N-PX is not extremely beneficial to potential inventors but it still can provide answers about the fund’s operations and control.
Beyond the shared filings that every Mutual Fund and ETF is required to file with the SEC, there are a few additional forms that Mutual Funds, ETFs, and Separate Accounts all file. Listed below are the typical SEC filing requirements that Mutual Funds, ETFs, and Separate Accounts must complete:
4. Form N-CEN or Report on Registrants
Form N-CEN is an annual report in which companies must disclose basic details, the funds it operates, what strategies it uses for its funds and accounts, and the organization of the funds and accounts.
Within this report, you can find basic details about specific Mutual Funds, ETFs, and Separate Accounts. Form N-CEN is relatively new with it replacing the previous Form N-SAR in 2016 in order to remove some of the previously outdated information. Its ultimate goal is to serve as an overall census of the funds and accounts by providing information regarding the authorized participants, investment strategies, organization, and use of borrowed funds.
5. Form N-PORT or Monthly Portfolio Investment Report
Form N-Port is a filing that contains detailed and standardized information about each holding in the Mutual Funds, ETFs, or Separate Accounts portfolio. The information is broken down monthly for every month included in a specific company’s fiscal quarter. This form requires funds to report their assets and liabilities, monthly total returns, information about each investment within the portfolio, the monthly flow of shares and dividends, and the funds and accounts securities lending.
Form N-PORT must be submitted within 60 days of each quarter’s end. It is important to note that Form N-Port is not required to be filed for every Mutual Fund, ETF, and Separate Account; instead, it is only required to be filed by funds and accounts whose profits go to investors instead of being reinvested within the account.
