June 28, 2018

SEC adopted amendments to public liquidity-related disclosure requirements for certain open-end funds. The amendments will become effective sixty days after they are published in the Federal Register.

Under the amendments, funds would discuss in their annual or semi-annual shareholder report the operation and effectiveness of their liquidity risk management programs. This requirement replaces a pending requirement that funds publicly provide a quantitative end-of-period snapshot of historic aggregate liquidity classification data for their portfolios on Form N-PORT. With respect to the N-PORT classification reporting, the amendments to Form N-PORT (the form that funds will file each month with portfolio holdings information) will provide funds the flexibility to split their portfolio holdings into more than one classification category in three specified circumstances when split reporting equally or more accurately reflects the liquidity of the investment or eases cost burdens.  Finally, Form N-PORT will require that funds disclose their holdings of cash and cash equivalents not reported elsewhere on the Form.

SEC adopted the open-end fund liquidity rule in October 2016 to promote effective liquidity risk management programs in the fund industry. Management of liquidity risk is important to funds’ ability to meet their statutory obligation—and their investors’ expectations—regarding redeemability of their shares.  Since adoption of the 2016 rule, 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 SEC. In addition to this rule, SEC previously adopted a rule that extends by six months the compliance date for the classification and classification-related elements of the liquidity rule and related reporting requirements. The staff has also issued guidance intended to assist funds in complying with the liquidity rule’s requirements. These actions aim to provide investors with accessible and useful information about liquidity risk management of the funds they hold while providing sufficient time for funds to implement the requirement to classify their holdings in an efficient and effective manner.   

 

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Keywords: Americas, US, Securities, Reporting, Form N-Port, Disclosures, Liquidity Risk, SEC

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