Investment Company Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting investment companies.

Pro Forma No "More-a"

On May 1, 2019, the SEC proposed amendments intended to:

  • Improve the financial information reported to investors about acquired and disposed businesses
  • Facilitate more timely access to capital
  • Reduce the complexity and costs to prepare the disclosures

The proposed amendments were adopted by the SEC on June 1, 2020, with revisions to the original proposal.


The amendment that impacts regulated investment companies deals with what many in the industry consider “dreaded” pro forma financial statement disclosures. We share common concerns related to the requirements of Form N-14, particularly the lack of relevancy to investors.

We at BBD agree with the Commission statement, “We believe that the pro forma financial information is not necessary in light of the costs to prepare such disclosures and given that the supplemental financial information will provide material information to investors by highlighting important changes resulting from a fund acquisition as context for the acquired fund’s financial statements.”

Bottom Line: We are glad to report that the pro forma requirements are no more. This requirement has been replaced with required supplemental financial information.

Based on the amended rule, the below supplemental information is now required:

  • A table showing current fees for the acquired fund and acquiring fund and pro forma fees
  • If investment restrictions of the acquiring fund cause the material modifications (disposals of positions), then a modified schedule of investments of the acquired fund must be included as well as a disclosure explaining the change
  • If material differences in accounting policies exist between the acquired and acquiring fund, then a disclosure is needed explaining the differences

The rule takes effect January 1, 2021. Early adoption is permissible as long as final amendments are applied in their entirety.

Final rules can be found on the SEC’s website listed below.