On March 14th, the Securities and Exchange Commission proposed amendments to the public liquidity-related disclosure requirements as they apply to certain open-end investment management companies. These amendments would replace a pending requirement that funds publicly provide the aggregate liquidity classification profile of their portfolios quarterly on Form N-PORT.
The SEC’s new proposal rescinds the current requirement in Form N-PORT under the Investment Company Act of 1940 that funds publicly disclose aggregate liquidity classification information about their portfolios and proposes to replace it with a new requirement that funds disclose information about the operation and effectiveness of their liquidity risk management program in their annual reports to shareholders.
Additionally, the proposal includes amendments to Form N-PORT that would allow funds classifying the liquidity of their investments on Form N-PORT to report multiple liquidity classification categories for a single position under certain specified circumstances. The proposal also contains a new requirement that funds and other registrants report their holdings of cash and cash equivalents on Form N-PORT.
The open-end fund liquidity rule was adopted by the SEC in October 2016 in an effort to promote effective liquidity risk management programs in the investment industry. The Commission’s staff has worked with the community to identify potential issues that could impact the effectiveness of the original rule. In addition to this proposed amendment, the SEC previously adopted a rule to extend the compliance date for the classification and classification-related elements of Rule 22e-4 by six months. The SEC also issued new guidance intended to assist funds in complying with the liquidity rule’s classification requirements. These actions are intended to provide investors with accessible and useful information about funds’ liquidity risk management programs while allowing sufficient time for the funds to meet compliance requirements efficiently.
Sources:
SEC Proposes Targeted Changes to Public Liquidity Risk Management Disclosure (sec.gov)
SEC Release No. IC-33046: Investment Company Liquidity Disclosure (sec.gov)
