The SEC voted on June 28th, 2018 to adopt amendments to public liquidity-related disclosure requirements for certain open-end funds. These funds must now discuss in their annual or semi-annual shareholder reports the operation and effectiveness of their liquidity risk management programs. This requirement replaces a quantitative end-of-period discussion of historic aggregate liquidity classification data for fund portfolios as part of Form N-PORT.
SEC Adopts Targeted Changes to Public Liquidity Risk Management Disclosure
In October 2016, the SEC adopted the open-end fund liquidity rule, as management of liquidity risk is important to funds’ abilities to meet their statutory obligations (and investors’ expectations) regarding redeemability of their shares. As a result of SEC staff outreach concerning effective implementation of this rule, the SEC is adopting these amendments in addition to other rules that extend compliance dates. The Commission has also issued guidance to aid funds in their compliance.
In addition to the aforementioned changes involving disclosure of funds’ liquidity risk management programs, the approved amendments also provide enhanced N-PORT classification reporting. Form N-PORT must be filed monthly with portfolio holdings information, and with these changes funds can 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. Form N-PORT will also require funds to disclose their holdings of cash and cash equivalents not reported elsewhere on the Form.
These changes will become effective sixty days after publication in the Federal Register.