Form N-PORT and Form N-CEN Reporting; Guidance on Open-End Fund Liquidity Risk
By: Jon-Luc Dupuy, Nicholas O. Ersoy, and Jordan A. Knight
On 28 August 2024, the United States Securities and Exchange Commission (SEC) adopted amendments to Rule 30b1-9 under the Investment Company Act of 1940, as amended, and Forms N-PORT and N-CEN (Final Rule). More specifically, the SEC adopted rule and form amendments that will: (1) require certain registered investment companies, including registered open-end funds, registered closed-end funds, and exchange traded funds organized as unit investment trusts but excluding money market funds, that report on Form N-PORT to file such reports on a monthly basis within thirty (30) days after the end of that month (rather than filing no later than sixty (60) days after the end of the fiscal quarter for the three (3) months in such quarter as currently required); and (2) amend Form N-CEN to require open-end funds to report certain information about service providers used to comply with liquidity risk management program requirements, among other technical amendments to the relevant rule and forms.
The SEC also provided guidance to funds on how to comply with existing open-end fund liquidity risk management program requirements, including regarding the frequency of classification of investments, the meaning of “cash,” and the various considerations funds should be making relating to highly liquid investment minimums.
The Final Rule and guidance are more limited in scope and appear to be less burdensome than anticipated based on the proposed rule amendments appearing in the November 2022 release. In particular, the SEC did not adopt or address the more contentious aspects of the proposed rule amendments which included, among other things: (i) mandatory swing pricing, (ii) a mandatory “hard close” requirement; and (iii) amendments to the liquidity risk management rule’s definitions and classifications. It remains to be seen whether the SEC staff will include these or related items in a re-proposal.