The Securities and Exchange Commission, on March 14, proposed amendments to public liquidity-related disclosure requirements for certain open-end investment management companies.
Under the proposal, funds would discuss in their annual report the operation and effectiveness of their liquidity risk management program, replacing a pending requirement that funds publicly provide the aggregate liquidity classification profile of their portfolios on Form N-PORT on a quarterly basis.
The proposed amendments are designed to improve the reporting and disclosure of liquidity information by registered open-end investment companies. The SEC is proposing a new requirement that funds disclose information about the operation and effectiveness of their liquidity risk management program in their annual reports to shareholders.
The Commission, in turn, is proposing to rescind 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, in light of concerns about the usefulness of that information for investors.
In addition, the Commission is proposing amendments to Form N-PORT that would allow funds classifying the liquidity of their investments pursuant to their liquidity risk management programs required by rule 22e-4 under the Investment Company Act of 1940 to report on Form N-PORT multiple liquidity classification categories for a single position under certain specified circumstances.
Finally, the Commission is proposing to add to Form N-PORT a new requirement that funds and other registrants report their holdings of cash and cash equivalents.
The SEC adopted the open-end fund liquidity rule in October 2016, an effort to promote effective liquidity risk management programs in the fund industry. Since adoption, staff has engaged in extensive outreach to identify potential issues associated with the effective implementation of the rule.
This outreach resulted in a series of actions taken by the Commission. In addition to today’s proposal, the Commission previously adopted a rule that extended, by six months, the compliance date for the classification and classification-related elements of Rule 22e-4 and related reporting requirements.
In conjunction with this extension, the staff issued new guidance intended to assist funds in complying with the liquidity rule’s classification requirements.