On October 13, 2016, the SEC voted to adopt rules, forms and amendments that are intended to modernize and enhance the reporting and disclosure of information by investment companies. The new rules will enhance data reporting for mutual funds, ETFs and other registered investment companies. With these rules, registered funds will be required to file a new monthly portfolio reporting form (Form N-PORT) and a new annual reporting form (Form N-CEN) that will require census-type information. The information will be reported in a structured data format, which will allow the SEC and the public to better analyze the information provided by filers. The rules also will require enhanced and standardized disclosures in financial statements and will add new disclosures in fund registration statements relating to a fund’s securities lending activities.
Form N-PORT and the Elimination of Form N-Q
The SEC adopted a new portfolio holdings report, Form N-PORT, that will be filed by all registered management investment companies (other than money market funds and small business investment companies) and unit investment trusts (UITs) that operate as exchange-traded funds (ETFs). Form N-PORT will require funds to report certain information about the fund and the fund’s portfolio investments as of the close of the preceding month, including: (a) general information about the fund; (b) fund assets and liabilities; (c) certain portfolio-level metrics, including certain risk metrics; (d) information regarding securities lending counterparties; (e) monthly returns; (f) flow information; (g) certain information regarding each investment in the portfolio; (h) miscellaneous securities (if any); (i) explanatory notes (if any), and (j) exhibits.
Form N-PORT will require funds to report the fund’s complete portfolio holdings and certain new information not currently required to be reported elsewhere. For example, Form N-PORT will require reporting of additional information relating to derivative investments and certain portfolio level risk metric calculations that measure a fund’s exposure and sensitivity to changing market conditions (e.g., changes in asset prices, interest rates, or credit spreads).
Reports must be filed with the SEC on a monthly basis, within 30 days after the close of each month, in a structured data format that facilitates collection and analysis of the data by the SEC. Once filed, the report for every third month will become available to the public 60 days after the end of the fund’s fiscal quarter.
The compliance date for new Form N-PORT is June 1, 2018 for funds that, together with other funds in the same “group of related investment companies,” hold net assets of at least $1 billion or more as of the end of the most recent fiscal year. Smaller fund families must comply by June 1, 2019. With the adoption of new Form N-PORT, the SEC will rescind Form N-Q, the current portfolio holdings report which is filed at the end of a fund’s first and third fiscal quarter (no later than 60 days after the period ends). The adopting release explains that the rescission of Form N-Q is effective August 1, 2019 (2 months after the latter N-PORT compliance date) to allow funds sufficient time to satisfy Form N-Q’s 60-day filing requirement with regard to their final filing on Form N-Q for the reporting period preceding their first filing on Form N-PORT.
Form N-CEN and Elimination of Form N-SAR
The SEC adopted a new annual reporting form, Form N-CEN, that will require all registered investment companies (except face amount certificate companies) to annually report certain census-type information to the SEC. Form N-CEN will replace Form N-SAR, the form currently used to report fund census information. The new form will include many of the same reporting elements of Form N-SAR but would eliminate certain outdated items and items of limited usefulness. The new form will require funds to provide, among other changes, information on whether a fund service provider was hired or terminated during the reporting period and whether it is affiliated with the fund or its adviser(s).
Reports must be filed annually within 75 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. The compliance date for Form N-CEN is June 1, 2018.
Amendments to Regulation S-X
The SEC adopted amendments to Regulation S-X that will modify the presentation and content of fund financial statements which are included in shareholder reports and fund registration statements. Among other things, the amendments will require the presentation of standardized disclosure regarding fund holdings in various open futures, forwards and swap contracts, as well as for any written and purchased option contracts. The amendments also will enhance the prominence of derivativesrelated disclosures in a fund’s schedule of investments, instead of in the notes to the financial statements. In addition, the amendments require new disclosures in the notes to the financial statements relating to a fund’s securities lending activities.
The compliance date for the amendments to Regulation S-X is August 1, 2017.
The SEC release relating to these new fund rules, “Investment Company Reporting Modernization,” Investment Company Act Release No. 32314 (October 13, 2016), is available at: https://www.sec.gov/rules/final/2016/33-10231.pdf.