On June 28, 2018, the SEC updated its Investment Company Liquidity Disclosure Rule via SEC Release No. IC-33142. The updates clarify and simplify certain required reporting by funds to the SEC. Surprisingly, the revisions come well before the earliest compliance dates for funds – December 1, 2018 – under the new Liquidity Risk Disclosure Rules.
The Commission received several letters from industry participants that pushed back on certain aspects of the new rule. Specifically, the industry reacted negatively to the public reporting of individual fund liquidity statistics through the filing of Form N-PORT.
Form N-PORT, as amended, will now keep the aggregate liquidity data reported by funds private. Instead, funds will now be required to report generally on the results and performance of internal Liquidity Risk Management Programs as part of the annual or semi-annual report to shareholders. This will be conducted via a narrative section within the Management Discussion area of shareholder reports.
Also, the SEC made the following additional changes to Form N-PORT:
- Fund assets may be split between liquidity buckets under certain circumstances (described below)
- Cash and cash equivalents (not reported in Parts C and D of the Form) must now be reported and will be made public quarterly
There are three instances when the SEC has determined a fund may split an asset among the liquidity buckets:
- A holding with multiple liquidity tiers, such as an asset with a put option on only a portion of the asset
- A fund with multiple sub-advisers may use the different classifications as provided by the sub-advisers for each portion of an asset managed
- An asset may be divided proportionally across liquidity buckets based upon an assumed sale of the entire position
Compliance dates for the filing of Form N-PORT and Form N-1A were changed as part of the amendment. Revised filing dates are:
|Form N-PORT||Compliance Date||First Filing Date|
|Large Entities ($1 bil +)||June 1, 2019||July 30, 2019|
|Small Entities||March 1, 2020||April 30, 2020|
|Form N-1A||Compliance Date|
|Large Entities||December 1, 2019|
|Small Entities||June 1, 2020|
The other compliance dates for Rule 22e-4, Form N-LIQUID, and Form N-CEN remain the same. Firms should remain on track to create and comply with new Liquidity Risk Management Programs as scheduled.
View SEC Release No. IC-33142, Investment Company Liquidity Disclosure