On May 20, 2015 the SEC proposed rules, forms and amendments to modernize the reporting and disclosure of information by registered investment companies and investment advisors.  The proposals are seen as a first step in a potential series of rulemakings by the SEC in the investment management area to increase transparency and better understand investment companies’ activities regarding derivatives and illiquid securities.  

Investment Company Proposals

  • New Monthly Portfolio Reporting Form. New Form N-PORT would require certain registered investment companies to report information about their monthly portfolio holdings to the SEC on a monthly basis, including:
  • data related to the pricing of portfolio securities
  • information related to repurchase agreements, securities lending activities and counterparty exposures
  • terms of derivatives contracts
  • discrete portfolio level and position level risk measures to better understand fund exposure to changes in market conditions
  • information contained on reports for the last month of each fund’s fiscal quarter
    • This information would be available to the public. The SEC is also considering rescinding Form N-Q, which requires that funds report portfolio holdings for the first and third fiscal quarters.
  • New Annual Reporting Form. New Form N-CEN would require registered investment companies to annually report certain census-type information to the SEC on an annual basis and would replace the form currently used to report fund census information (Form N-SAR). The form would require additional information on exchange-traded funds and securities lending. Form N-CEN would be filed annually within 60 days of the end of the fund’s fiscal year, rather than semi-annually as is currently required by Form N-SAR for most funds.
  • Structured Data Format. The proposed amendments would require that funds report portfolio and census information in a structured data format.  
  • Amendments to Regulation S-X. The proposed amendments would require registered funds to include in their financial statements a standardized schedule containing detailed information regarding their derivative instruments. The proposed amendments would also require information in the notes to the financial statements of their securities lending activities.
  • Shareholder Reports May Be Provided on Websites. The proposed amendments would permit mutual funds and other registered investment companies to make shareholder reports and quarterly portfolio reports available on their website, unless shareholders opt for paper copies. Funds currently satisfy delivery requirements by printing and mailing shareholder reports, unless shareholders have affirmatively requested electronic delivery.

Investment Advisor Proposals

Registration and Reporting Form. Proposed amendments to Form ADV would require investment advisors to provide additional information regarding their risk profile and the risk profile of the industry as a whole. For example, the proposals would:

  • require aggregate information related to assets held and use of borrowings and derivatives in separately managed accounts
  • permit by rule certain “umbrella registration” filing arrangements that are currently outlined in staff guidance
  • provide additional information about an advisor’s advisory business, including branch office operations and the use of social media

Recordkeeping Rule. The proposed amendments to Rule 204-2 would require advisors to maintain records of the calculation of performance information that is distributed to any person. Currently, advisors are only required to maintain performance information that is distributed to 10 or more persons. The proposed amendments also would require advisors to maintain communications related to performance or rate of return of accounts and securities recommendations.

Comments on the proposed rules are due within 60 days from the publication of the proposed rules in the Federal Register.

Proposing Release