Investment Company Notebook

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

Posts about Mutual Funds (3)

The 2017 Tax Cuts and Jobs Act in Practice: How Does Section 199A, the Qualified Business Income Deduction, Affect Investment Companies?

Posted by admin Jul 25, 2019 1:46:26 PM

This post is the second in a three-part series that examines implications of the 2017 Tax Cuts and Jobs Act for the investment management industry.  Part One introduced the Section 199A deduction and its impact on the investment management industry. Part Three will examine the deduction and C Corporation to S Corporation transitions.  Feel free to be in touch with Matt Romano, tax partner, with questions about how these complex new tax developments affect you and your business.

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SEC Updates the Loan Rule

Posted by Lori Ehleben Jul 12, 2019 4:59:35 PM

In June 2019, the SEC issued amendments to Rule 2-01 of Regulation S-X (“the Loan Rule”). The amendments now more effectively identify whether independence may be impaired with respect to an audit client when the audit firm or its covered members have a lending relationship with certain shareholders of that audit client. 

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SEC Disclosure Update and Simplification Release

Posted by John Braun Nov 16, 2018 3:15:31 PM

On August 17, 2018, the SEC adopted what effectively amounts to “housekeeping items” for a variety of public issuers. These updates are effective November 5, 2018. 

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Updates To Disclosure Requirements For Fair Value Measurements: What You Need To Know Relevant To Registered Investment Companies

Posted by admin Nov 6, 2018 12:18:53 PM

In August 2018, the Financial Accounting Standards Board (FASB) finalized changes to fair value measurement disclosure requirements that had been under debate for several years as part of the disclosure framework project.

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Another ETF Accounting Trap

Posted by James Kaiser May 7, 2018 3:30:12 PM

Today I am writing about an accounting error I have been seeing more and more while performing audits of exchange traded funds (“ETFs”).

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Considerations For Mutual Funds For Allocating Earnings and Profits to Distributions

Posted by James Kaiser Oct 10, 2016 7:05:00 PM

In this post, we’ll consider the following:

  • Current requirements, as updated by the RIC Modernization Act of 2010, for allocating earnings and profits across multiple distribution dates in instances where total annual distributions exceed earnings and profits for funds that have fiscal year ends that span two calendar years (e.g.  non-calendar fiscal year end funds)
  • Why this requirement may impact the reporting of distributions in a semi-annual report
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How to Account for Commission Recapture Program Rebates

Posted by admin Apr 29, 2014 3:02:08 PM

Commission recapture occurs when a fund enters into an agreement with an institutional broker to rebate a portion of trading commissions directly to a fund. How does commission recapture work?

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IRS Form 8937- Reporting Corporate Actions

Posted by admin Aug 8, 2013 1:59:47 PM

Starting in 2012, Regulated Investment Companies (“RIC’s”) are required to file Form 8937 to report corporate actions that affect the basis of the RIC stock. Such corporate actions include, but are not limited to, mergers, stock splits, spin-offs, return of capital distributions, etc.

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Determination of an NAV Error When the Net Asset Value Reported on the Financial Statements Differs From Published Values

Posted by admin Jul 10, 2013 4:31:00 PM

For starters, the regulatory provisions relating to net asset value (“NAV”) can be found in the rules adopted under the Investment Company Act of 1940, in particular, Rules 2A-4 and 22c-1. A few notable excerpts from these two rules are as follows:

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Consideration of Fair Value and International Securities

Posted by admin Apr 12, 2013 6:23:44 PM

Long has the fair valuation of portfolio securities of investment companies been under scrutiny by regulators and auditors. Under the risk-based approach to auditing, fair valuation of investments remains one of the pillars for which effective auditing procedures are designed. In a 2001 letter to the Investment Company Institute, the Securities and Exchange Commission made the following comments in regard to fair valuation of portfolio securities:

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