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March 14, 2018

SEC proposed amendments to the forms designed to improve the reporting and disclosure of liquidity information by registered open-end investment companies. Under the proposal, funds must disclose information about the operation and effectiveness of their liquidity risk management program in their annual reports to shareholders. Comments should be received on or before 60 days after publication of the proposed rule in Federal Register.

SEC proposed to rescind the current requirement in Form N-PORT that funds publicly disclose aggregate liquidity classification information about their portfolios, in light of concerns about the usefulness of that information for investors. SEC also proposed 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 specified circumstances. Finally, SEC proposed to add to Form N-PORT a new requirement that funds and other registrants report their holdings of cash and cash equivalents.

To promote effective liquidity risk management programs in the funds industry, SEC had also adopted the open-end fund liquidity rule in October 2016. 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 SEC. Additionally, SEC had earlier 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 classification requirements of the liquidity rule. These actions, along with the proposed rule on liquidity risk disclosures, intend 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 efficiently and effectively.  


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Keywords: Americas, US, Securities, Disclosure Requirements, Liquidity Risk, Reporting, SEC

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