The Securities and Exchange Commission has adopted final rules to modernize investment company reporting, to require registered open-end management investment companies to establish and report liquidity risk management programs, and to permit such companies to use swing pricing. The effective dates for these changes vary.
The Modernization of Investment Company Reporting
We previously posted blog articles on the modernization of investment company reporting that the SEC proposed back in 2015. This rule is an overhaul of many EDGAR forms (with an additional of new XML forms) and includes amendments to Regulation S-X.
Form N-PORT
Effective June 1, 2018 for fund complexes with over $1 billion in net assets
Effective June 1, 2019 for fund complexes with less than $1 billion in net assets
Form N-CEN
Effective June 1, 2018
Liquidity Management Rules and Swing Pricing
This blog post covers the rules that requires mutual funds and exchange-traded funds (EFTs) to implement liquidity management risks. The liquidity risk management rules were designed to promote effective liquidity risk management for mutual funds and ETFs, reducing the risk that funds will not be able to meet shareholder redemptions and mitigating potential dilution of the interests of fund shareholders.
Form N-LIQUID
Effective December 1, 2018 for fund complexes with over $1 billion in net assets
Effective June 1, 2019 for fund complexes with less than $1 billion in net assets
In the same previous blog, we discussed swing pricing, which is the process of adjusting a fund’s net asset value per share to pass on to purchasing or redeeming shareholders certain of the costs associated with their trading activity. The SEC changes permit open-end funds (except money market funds or ETFs) to use swing pricing. A fund that chooses to use swing pricing must adjust its net asset value by a specified amount– the swing factor – once the level of net purchases into or net redemptions from the fund has exceeded a specified percentage or percentages of the fund’s net asset value known as the swing threshold. A fund’s swing pricing policies must specify how the fund’s swing factor and swing threshold are determined and establish and disclose an upper limit on the swing factor used. The amendments also require the fund’s board to approve the fund’s swing pricing policies and procedures as well as any changes to them.
Form N-1A
Form N-PORT
Form N-CEN
The SEC is delaying the effective dates that would allow forms to use swing pricing. These final amendments, if adopted, would become effect 24 months after publication in the Federal Register.
Sources
SEC Adopts Rules to Modernize Information Reported by Funds, Require Liquidity Risk Management Programs, and Permit Swing Pricing
SEC Release No. 33-10231 - Investment Company Reporting Modernization
SEC Release No. 33-10233 - Investment Company Liquidity Risk Management Programs
SEC Release No. 33-10234 - Investment Company Swing Pricing
Additional Resources
Novaworks Blog: SEC Proposes Modernization for Investment Company Reporting
Novaworks Blog: SEC Proposes Liquidity Management Rules
