Understanding Disclosure Documents

Disclosure documents are written materials that provide important information about investments, firms and financial professionals. These documents can give you information when you're considering a new firm, opening a new account, trying a new investment strategy, or buying investment products such as stocks, bonds, mutual funds, exchange-traded funds (ETFs) or municipal securities. They also provide details of your transactions and holdings, as well as the fees and costs you pay.

According to the Investor Survey component of the FINRA Investor Education Foundation's 2024 National Financial Capability Study (NFCS), only 51 percent of investors recall receiving disclosures, and even fewer say they at least skim them. However, taking time to review disclosure documents can help you make better decisions, avoid surprises and spot potential problems early.

Here are some of the most common disclosure documents and information sources you might see when you invest:

Choosing a Firm or Investment Professional

• Relationship Summary (Form CRS) – Broker-dealers and investment advisors are required to provide you with a relationship summary. This form tells you about the types of services the firm offers and the fees, costs, conflicts of interest, and required standards of conduct associated with those services. It also tells you whether the firm and its investment professionals have reportable legal or disciplinary history and how to get more information about the firm. Form CRS also includes key questions to ask your investment professional.
• BrokerCheck – FINRA's free BrokerCheck tool can help you research the background and experience of investment professionals and firms. You can find information about employment history, qualifications, disciplinary history and more.
• Regulation Best Interest (Reg BI) Disclosure – This document provides facts about your brokerage relationship, including services, products offered, fees and costs, and conflicts of interest.

Opening an Account

• Account Agreement – This contract between you and your brokerage firm outlines how orders are executed, how disputes are resolved, account features and more. It also contains information about your legal rights and what authority the firm has to act on your behalf.
• Privacy Notice – Known as a Regulation S-P notice, this disclosure details the types of information the firm collects, how it might be shared with affiliates or third parties, and what measures the firm takes to protect your data. This notice--which you receive at account opening and then once a year--also mentions your rights to opt out of information sharing.
• Account-Specific Disclosures – Before approving you to engage in trading strategies using leverage--like options trading and margin--your brokerage firm is required to provide you with disclosures explaining the risks and costs. For example, the Characteristics and Risks of Standardized Options explains what options are, how they work and are priced, options strategies, risks involved in options trading, and the rules and procedures for exercising options and settling transactions. Other account-specific disclosures might provide fee schedules, specific account features or additional information.

Making Investments

• Prospectus – A prospectus is a legal document that provides detailed information about registered securities offerings such as a stock, corporate bond, mutual fund, ETF or variable annuity. It explains the essential terms of the investment. The specific content of any prospectus varies depending on the type of security. Mutual funds and ETFs also typically have a summary prospectus--a shorter, more readable version that highlights the most important information, including investment objectives, fees, risks and past performance.
• Official Statement – An official statement is a document prepared by or on behalf of a state or local government in connection with a new issue of municipal securities that describes the essential terms of the bonds. An official statement is similar to a prospectus for a corporate stock or bond offering.
• Other Product-Specific Disclosures – Some investment products might have additional disclosures beyond offering documents. For example, certain alternative investments might have limited partnership agreements.

Staying Informed

• Shareholder Reports – Funds disclose their holdings at least quarterly and also provide annual and semiannual reports to shareholders that highlight key information for assessing and monitoring your fund investments. Public companies file periodic reports that contain financial statements, management discussion and analysis, and material changes or risks related to their operations.
• Updated Product Disclosures – Some investment product disclosures are updated regularly. Prospectuses for mutual funds and ETFs, for example, must be updated at least annually, as well as when there are material changes, such as a new manager or a change in strategy or fees.

Keeping Track of Your Accounts and Transactions

Your account statements and trade confirmations are among the most important disclosures you'll receive, because they reflect your specific holdings, transactions and costs. Reviewing them carefully and regularly is one of the most effective ways to stay on top of your investments and catch errors or potential misconduct early. If you find an inaccuracy or something you don't recognize, contact your firm right away. If the issue isn't resolved to your satisfaction, you can file a complaint with FINRA's online Complaint Center.

• Account Statements – Brokerage firms and mutual fund companies must provide you with an account statement at least quarterly for accounts with any holdings. This statement lists all your positions, values, transactions and fees paid. Many firms voluntarily provide monthly statements to all customers.
• Trade Confirmations – These list a price, fee and settlement date for each transaction you make. This information is crucial for verifying that your trades were executed as expected and that you're aware of the costs involved.

You can receive a disclosure via email, physical mail or your online account portal. Many required filings are also available from the U.S. Securities and Exchange Commission's (SEC's) EDGAR database, while those related to municipal securities are available from EMMA.

Disclosure documents exist to inform and protect you. When something's unclear, ask questions, especially before making any investment decisions, and stay alert to red flags that could indicate possible fraud, such as mentions of guaranteed returns or statements downplaying risk.

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