Investment Company Reporting Modernization, 58731-58739 [2017-26922]
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Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Rules and Regulations
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Safety Commission.
[FR Doc. 2017–26954 Filed 12–13–17; 8:45 am]
BILLING CODE 6355–01–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 229, 232, 239 and 249
[Release Nos. 33–10446; 34–82280; File No.
S7–19–16]
RIN 3235–AL95
Compliance Date for Form 10–D
Hyperlink Requirements
Securities and Exchange
Commission.
ACTION: Notification of compliance date.
AGENCY:
The Securities and Exchange
Commission (‘‘Commission’’) is
publishing this document to inform the
public that it has set a compliance date
for its previously-adopted exhibit
hyperlinking requirements for Form 10–
Ds that require hyperlinks to any
exhibits filed with Form ABS–EE. The
Commission on March 1, 2017 required
registrants that file registration
statements and reports subject to the
exhibit requirements under Item 601 of
Regulation S–K, or that file Forms F–10
or 20–F, to include a hyperlink to each
exhibit listed in the exhibit index of
these filings, but deferred setting a
compliance date with respect to any
Form 10–D that will require hyperlinks
to any exhibits filed with Form ABS–EE
until the Commission announced that
technical programming changes to allow
issuers to include Form 10–D and Form
ABS–EE in a single submission had
been completed, and published a
notification of the compliance date for
Form 10–D in the Federal Register.
DATES: The compliance date with
respect to any Form 10–D that will
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SUMMARY:
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require hyperlinks to any exhibits filed
with Form ABS–EE is June 1, 2018.
FOR FURTHER INFORMATION CONTACT:
Kayla Roberts, Special Counsel, at (202)
551–3850, in the Office of Structured
Finance, Division of Corporation
Finance, U.S. Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
SUPPLEMENTARY INFORMATION: On March
1, 2017, the Commission adopted rule
and form amendments requiring
registrants that file registration
statements and reports subject to the
exhibit requirements under Item 601 of
Regulation S–K,1 or that file Forms F–
10 2 or 20–F,3 to include a hyperlink to
each exhibit listed in the exhibit index
of these filings.4 To enable the inclusion
of hyperlinks, the amendments also
require that registrants submit all filings
on EDGAR in HyperText Markup
Language (‘‘HTML’’) format because the
American Standard Code for
Information Interchange (‘‘ASCII’’)
format cannot support functional
hyperlinks.5
The amendments took effect on
September 1, 2017 for most registrants.
Registrants that are ‘‘smaller reporting
companies,’’ as defined in Rule 405 6
under the Securities Act of 1933 and
Rule 12b–2 7 under the Securities
Exchange Act of 1934, or are neither
‘‘large accelerated filers’’ nor
‘‘accelerated filers,’’ as defined in
Exchange Act Rule 12b–2, and that
submit filings in ASCII will not need to
comply with the new rules until
September 1, 2018, one year after the
effective date for other filers.8 The
Commission deferred establishing a
compliance date for any Form 10–D
filing that will require a hyperlink to an
exhibit filed with Form ABS–EE until
Commission staff completed
programming changes to EDGAR to
allow Form 10–D filers to include the
Form 10–D and Form ABS–EE in a
single EDGAR submission so that the
required hyperlinks could be created at
the time the Form 10–D is filed.9 Such
1 17
CFR 229.601.
CFR 239.40.
3 17 CFR 249.220f
4 Exhibit Hyperlinks and HTML Format, Release
Nos. 33–10322, 34–80132 (March 1, 2017) [82 FR
14130 (March 17, 2017)] (‘‘Hyperlinks Release’’).
5 See id. at Section I.
6 17 CFR 230.405.
7 17 CFR 240.12b–2.
8 See Hyperlinks Release, supra note 1, at Section
II.B.3.
9 See Hyperlinks Release, supra note 1, at n. 55
(explaining that asset-backed issuers are required to
incorporate by reference Form ABS–EE information
in Form 10–D and how the hyperlinking
requirement applies with respect to Form 10–D
filings) & n.72 and accompanying text.
2 17
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programming changes have now been
completed.10
Any registrant filing a Form 10–D on
or after June 1, 2018, must include a
hyperlink to any exhibit filed with Form
ABS–EE that is included in the exhibit
index of Form 10–D.11
By the Commission.
Dated: December 11, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017–26982 Filed 12–13–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 232, 239, 249, 270, and
274
[Release Nos. 33–10442; 34–82241; IC–
32936; File No. S7–08–15]
RIN 3235–AL42
Investment Company Reporting
Modernization
Securities and Exchange
Commission.
ACTION: Temporary final rule.
AGENCY:
The Securities and Exchange
Commission (the ‘‘Commission’’) is
adopting a temporary final rule that
requires funds in larger fund groups to
maintain in their records the
information that is required to be
included in Form N–PORT, in lieu of
filing reports with the Commission,
until April 2019. As a result, larger
funds groups will be required to begin
submitting reports on Form N–PORT on
the Electronic Data Gathering, Analysis,
and Retrieval (‘‘EDGAR’’) system by
April 30, 2019, and smaller fund groups
will be required to begin submitting
reports on Form N–PORT by April 30,
2020. The information that funds in
larger fund groups maintain in their
records will be subject to examination
by the Commission. In addition, the
Commission is delaying the rescission
of current Form N–Q and delaying the
effectiveness of certain amendments to
other rules and forms.
DATES: Effective January 16, 2018 until
March 31, 2026. The effective date for
the amendments to 17 CFR 232.401,
249.332, 270.8b–33, 270.30a–2,
SUMMARY:
10 Adoption of Updated EDGAR Manual, Release
No. 33–10444, (December 8, 2017), available at
https://www.sec.gov/rules/final.shtml.
11 Issuers are not required to submit their Form
10–D and Form ABS–EE in a single submission. An
issuer may file a Form 10–D and Form ABS–EE in
separate submissions and comply with the new
requirements by including an external hyperlink in
the Form 10–D to a previously filed Form ABS–EE.
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270.30a–3, 270.30b1–5, and 17 274.130
and in Instructions 54, 57, 59, and 61 in
the final rule published at 81 FR 81870
on November 18, 2016, is delayed until
May 1, 2020. The applicable compliance
dates are discussed below.
FOR FURTHER INFORMATION CONTACT: J.
Matthew DeLesDernier, Senior Counsel,
Jacob D. Krawitz, Branch Chief, or Brian
McLaughlin Johnson, Assistant Director,
at (202) 551–6792, Investment Company
Rulemaking Office, Division of
Investment Management, Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The
Commission is adopting new temporary
rule 30b1–9(T) [17 CFR 270.30b1–9(T)]
under the Investment Company Act of
1940 [15 U.S.C. 80a–1 et seq.]
(‘‘Investment Company Act’’). The
Commission is also delaying the
compliance dates associated with the
requirement for smaller fund complexes
to file reports on new Form N–PORT
[referenced in 17 CFR 274.150] under
the Investment Company Act [15 U.S.C.
80a–1 et seq.] and new rule 30b1–9 [17
CFR 270.30b1–9] under the Investment
Company Act. In addition, the
Commission is delaying the effective
date associated with: the rescission of
rule 30b1–5 [17 CFR 270.30b1–5] under
the Investment Company Act;
amendments to rules 8b–33 [17 CFR
270.8b–33], 30a–2 [17 CFR 270.30a–2],
30a–3 [17 CFR 270.30a–3], and 30d–1
[17 CFR 270.30d–1] under the
Investment Company Act; amendments
to Forms N–1A [referenced in 17 CFR
274.11A], N–2 [referenced in 274.11a–
1], and N–3 [referenced in 274.11b]
under the Investment Company Act and
the Securities Act of 1933 [15 U.S.C. 77a
et seq.] (‘‘Securities Act’’); the rescission
of Form N–Q [referenced in 17 CFR
274.130] under the Investment
Company Act and Securities Exchange
Act of 1934 [15 U.S.C. 78a et seq.]
(‘‘Exchange Act’’); and amendments to
rule 401 [17 CFR 232.401] of Regulation
S–T [17 CFR 232].
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I. Discussion
In recognition of the importance of
sound data security practices and
protocols for sensitive, nonpublic
information, the Commission is
modifying its approach to the
requirement to submit reports on Form
N–PORT on the EDGAR system. Funds
in larger fund groups would have been
required to submit reports on Form N–
PORT in EDGAR no later than July 30,
2018. The Commission is adopting a
temporary final rule that requires funds
in larger fund groups to maintain in
their records the information that is
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required to be included in Form N–
PORT beginning no later than July 30,
2018. This information will be subject to
examination by Commission staff. As a
result, funds in larger fund groups must
begin to submit reports on Form N–
PORT on EDGAR by April 30, 2019, and
smaller fund groups must begin to
submit reports on Form N–PORT by
April 30, 2020. In addition, the
Commission is delaying the rescission
of current Form N–Q and delaying the
effectiveness of certain amendments to
other rules and forms.
A. Form N–PORT
On October 13, 2016, the Commission
adopted new rules and forms as well as
amendments to its rules and forms to
modernize the reporting and disclosure
of information by registered investment
companies.1 In particular, the
Commission adopted new Form N–
PORT, which requires certain registered
investment companies to report
information about their monthly
portfolio holdings to the Commission in
a structured data format. We also
adopted new Form N–CEN, which
requires registered investment
companies, other than face-amount
certificate companies, to annually report
certain census-type information to the
Commission in a structured data format.
In addition, we rescinded current Forms
N–Q (effective August 1, 2019) and N–
SAR and amended certain other rules
and forms.2
As the Commission stated in the
Adopting Release, Form N–PORT, as
well as new rules, other forms, and
amendments to existing rules and forms
will, among other things, improve the
information that the Commission
receives from investment companies
and assist the Commission, in its role as
primary regulator of investment
companies, to better fulfill its mission of
protecting investors; maintaining fair,
orderly, and efficient markets; and
facilitating capital formation. Investors
and other potential users can also utilize
this information to help them make
more informed investment decisions.
Form N–PORT is a new portfolio
holdings reporting form that will be
filed by all registered management
investment companies, other than
1 Investment Company Reporting Modernization,
Investment Company Act Release No. 32314 (Oct.
13, 2016) [81 FR 81870 (Nov. 18, 2016)] (‘‘Adopting
Release’’).
2 The Commission also adopted amendments to
Regulation S–X, which require standardized,
enhanced disclosure about derivatives in
investment company financial statements, as well
as other amendments. Finally, it adopted
amendments to Forms N–1A, N–3, and N–CSR to
require certain disclosures regarding securities
lending activities. Id.
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money market funds and small business
investment companies, and by unit
investment trusts that operate as
exchange-traded funds (collectively,
‘‘funds’’).3 Form N–PORT requires
reporting of a fund’s complete portfolio
holdings and additional information
that will facilitate risk analysis and
other Commission oversight. Reports on
Form N–PORT are required to be filed
in an extensible markup language
(‘‘XML’’) structured data format no later
than 30 days after the close of each
month using the Commission’s EDGAR
system.4 In general, reports on Form N–
PORT for every third month of each
fiscal quarter will be available to the
public 60 days after the end of the fiscal
quarter.5
Certain information reported on Form
N–PORT will be kept nonpublic. As we
noted in the Adopting Release, we
recognize that more frequent portfolio
disclosure than was currently required
could potentially harm fund
shareholders by expanding the
opportunities for professional traders to
engage in predatory trading practices.6
In addition, some of the information
required by Form N–PORT could imply
a false sense of precision because such
data, by design, are an aggregation of
multiple assumptions and projections.7
In light of these considerations, the
Commission in the Adopting Release
determined not to make public the
information reported on Form N–PORT
for the first and second months of each
fund’s fiscal quarter that is identifiable
to any particular fund or adviser; any
information reported with regards to
country of risk and economic exposure,
delta, or miscellaneous securities; or
explanatory notes related to any of those
topics that is identifiable to any
particular fund or adviser.8 In addition,
the information on Form N–PORT that
will be made public will only be made
public after an additional 30-day delay
(i.e., 60 days after quarter-end).
Moreover, we determined to make all
reports for the first six months following
June 1, 2018 nonpublic in order to allow
funds and the Commission a period of
time to fine-tune the technical
specifications and data validation
processes for reports on Form N–PORT.9
When we adopted the Form N–PORT
filing requirement, we provided for an
effective date of January 17, 2017, with
a tiered set of compliance dates based
3 Form
N–PORT.
rule 30b1–9.
5 General Instruction F to Form N–PORT.
6 See Adopting Release, supra note 1, Part II.A.4.
7 See id.
8 General Instruction F to Form N–PORT.
9 See Adopting Release, supra note 1, Part II.H.1.
4 See
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on a fund group’s asset size.
Specifically, for larger entities—funds
that together with other investment
companies in the same ‘‘group of related
investment companies’’ have net assets
of $1 billion or more as of the end of the
most recent fiscal year of the fund
(‘‘larger fund groups’’)—we adopted a
compliance date of June 1, 2018.10 This
would have resulted in larger fund
groups filing their first reports on Form
N–PORT, reflecting data as of June 30,
no later than July 30, 2018.11 For
smaller fund groups, we adopted a
compliance date of June 1, 2019,
anticipating that smaller fund groups
would benefit from this extra time to
comply and potentially would benefit
from the lessons learned by the larger
fund groups during the adoption period
for Form N–PORT.12
B. Commission’s Determination To
Delay Form N–PORT Filing Requirement
As we noted in the Adopting Release,
we recognize the importance of sound
data security practices and protocols for
sensitive, nonpublic information,
including information that may be
competitively sensitive.13 To that end,
the Adopting Release acknowledged
that Commission staff was working to
design controls and systems for the use
and handling of Form N–PORT data in
a manner that reflects the sensitivity of
the data and is consistent with the
maintenance of its confidentiality.14 In
the Adopting Release, the Commission
also stated that it ‘‘expect[ed] that the
staff will have reviewed the controls
and systems in place for the use and
handling of nonpublic information
reported on Form N–PORT.’’ 15
In May 2017, the Commission’s
Chairman initiated an assessment of the
Commission’s internal cybersecurity
risk profile and its approach to
cybersecurity.16 The Chairman also
directed the staff to take a number of
steps designed to strengthen the
Commission’s cybersecurity risk profile,
with an initial focus on EDGAR.17 As
the Chairman explained, the
Commission receives, stores, and
transmits substantial amounts of data,
including sensitive and nonpublic data,
10 Id.
11 Id.
12 Id.
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13 See
Adopting Release, supra note 1, Part II.A.3.
14 Id.
15 Id.
16 Statement on Cybersecurity (September 20,
2017), available at https://www.sec.gov/news/
public-statement/statement-clayton-2017-09-20.
17 Update on Review of 2016 Cyber Intrusion
Involving EDGAR System (Oct. 2, 2017), available
at https://www.sec.gov/news/press-release/2017186.
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in support of its mission.18 Much of that
data is collected through EDGAR, which
receives and processes over 1.7 million
electronic filings per year.19 Thus, as
part of the Commission’s efforts to
strengthen its cybersecurity risk profile
going forward, the Commission has
initiated a focused review and, as
necessary or appropriate, uplift of the
EDGAR system.20 The Commission has
added, and expects to continue to add,
additional resources to these efforts,
which are expected to include outside
consultants, and will increase the focus
on data security matters.21 As the
Chairman has indicated, these efforts
will require substantial time and effort
to complete.22
Certain of these measures, which will
be designed to improve EDGAR’s
functionality and security, could
negatively affect EDGAR’s ability to
validate and accept Form N–PORT
filings in a timely manner, in particular
during peak filing periods. Efforts to
address any such potential effects on
performance are underway, but we have
determined to delay by nine months the
requirement that funds file reports on
Form N–PORT through the EDGAR
system in order to provide time to
complete this review and to implement
and test any resulting modifications to
the EDGAR system.23 This delay of
filing reports on Form N–PORT on
EDGAR is necessary for Commission
staff to complete and review any
modifications to EDGAR that are
necessary to process these filings
effectively and securely, given their
frequency, volume, and complexity, as
well as the nonpublic nature of much of
the data.
C. Temporary Rule 30b1–9(T)
To effectuate the nine-month delay,
we have determined to adopt temporary
rule 30b1–9(T), which will have the
effect of delaying the EDGAR
submission requirements associated
with Form N–PORT for larger fund
groups until April 2019. As a result,
funds in larger fund groups that
previously would have been required to
submit their first reports on Form N–
PORT on EDGAR for the period ending
18 Statement on Cybersecurity (Sept. 20, 2017),
available at https://www.sec.gov/news/publicstatement/statement-clayton-2017-09-20.
19 Id.
20 Update on Review of 2016 Cyber Intrusion
Involving EDGAR System (Oct. 2, 2017), available
at https://www.sec.gov/news/press-release/2017186.
21 Id.
22 Id.
23 The Commission has not considered any other
changes to Form N–PORT, rules, other forms, and
amendments besides those that are discussed in this
release.
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June 30, 2018 (no later than July 30,
2018) will now be required to submit
their first reports on EDGAR by April
30, 2019.24 During this period, funds in
larger fund groups that are subject to the
June 1, 2018 compliance date must
satisfy their reporting obligation by
maintaining in their records the
information required to be included in
Form N–PORT instead of submitting the
information via EDGAR.25 To provide
for Commission access to this
information for a reasonable period of
time, consistent with current record
retention requirements for registered
investment companies, the temporary
rule provides that the information
maintained in the company’s records
shall be treated as a record under
section 31 of the Investment Company
Act and rule 31a–1 hereunder and
subject to the requirements of rule 31a–
2.26 Like all fund records under the Act,
this information is subject to
examination by Commission staff.27
Temporary rule 30b1–9(T) does not
change the June 1, 2018 compliance
date adopted for Form N–PORT for
larger fund groups—it instead requires a
temporary method for larger fund
groups to fulfill their Form N–PORT
reporting obligations.28
The Adopting Release delayed
compliance for smaller fund groups by
one year so that they could benefit from
the lessons learned by the larger fund
groups’ earlier compliance date.29 In
order to maintain this benefit the
compliance date for smaller fund groups
24 See
Rule 30b1–9(T)(a).
Furthermore, the EDGAR reporting
requirements added to Form N–PORT by the
Investment Company Liquidity Risk Management
Programs Adopting Release (‘‘Liquidity Adopting
Release’’) will also be delayed by the temporary
rule. See Investment Company Liquidity Risk
Management Program, Investment Company Act
Release No. 32315 (Oct. 13, 2016) [81 FR 82142
(Nov. 18, 2016)]. However, funds will only be
required to comply with temporary rule 30b1–9(T)
with respect to these liquidity-related additions to
Form N–PORT based on the compliance date set
forth in the Liquidity Adopting Release for these
additions.
26 See rule 31a–2(a)(2) (providing that funds must
preserve certain records for a period not less than
six years from the end of the fiscal year, the first
two years in an easily accessible place); see
generally rule 31a–2(f) (requirements for electronic
records). Because rule 31a–2 provides for
preservation for not less than six years from the end
of the fiscal year, the temporary rule will no longer
be effective March 31, 2026.
27 15 U.S.C. 80a–30(b)(1).
28 See rule 30b1–9(T)(a). While neither this
temporary rule nor rule 31a–2(f) require that the
information maintained in the funds’ records be
stored in an XML format, we believe that doing so
would facilitate the filing of Form N–PORT
following the nine-month delay as we believe funds
can use this delay to gain greater facility with the
structured reporting format.
29 See Adopting Release, supra note 1, at Part
II.H.1.
25 Id.
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will be delayed by nine months from the
original compliance date (until March 1,
2020). Not providing smaller fund
groups with a compliance date delay
would deprive them of receiving the full
benefit of the tiered filing requirement
that we previously adopted. However,
the temporary rule is not relevant to
these smaller fund groups,30 as the
relevant provision of the temporary rule
applies until April 1, 2019—before the
new compliance date for smaller fund
groups (March 1, 2020). As a result,
smaller fund groups are not subject to a
requirement to prepare and then retain
as a record the information required on
Form N–PORT; rather, they will,
pursuant to the Adopting Release and
this release, need to prepare and file
Form N–PORT beginning on or after the
delayed March 1, 2020 compliance date.
D. Form N–Q Filing Requirement
In order for investors and other users
to continue to receive at the least the
same information that they currently
receive regarding fund portfolio
holdings, we are requiring funds to
continue filing public reports on Form
N–Q until they begin filing reports on
Form N–PORT using EDGAR (i.e., the
March 31, 2019 reporting period for
larger fund groups and March 31, 2020
for smaller fund groups). As the
Commission concluded in the Adopting
Release, Form N–PORT will render
reports on Form N–Q unnecessarily
duplicative. To that end, the
Commission staff recently provided
guidance that once a fund begins filing
reports on Form N–PORT, it will no
longer be required to file reports on
Form N–Q.31 The Adopting Release
rescinded Form N–Q, effective August
1, 2019. This effective date would have
allowed funds sufficient time to satisfy
Form N–Q’s 60-day filing requirement
with regard to their final filing on Form
N–Q for the reporting period preceding
their first filing on Form N–PORT.32 We
also adopted certain changes to Form
N–CSR to account for the rescission of
Form N–Q.33 Specifically, as we noted
in the Adopting Release, when a fund
ceases filing reports on Form N–Q, its
certification on Form N–CSR must state
that the certifying officer has disclosed
any change in the registrant’s internal
control over financial reporting that
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30 See
rule 30b1–9(T)(a).
Investment Company Reporting
Modernization Frequently Asked Questions,
available at https://www.sec.gov/investment/
investment-company-reporting-modernizationfaq#_ftnref5.
32 Adopting Release, supra note 1, at 81966.
33 Id. at 81912–13. We also adopted certain
technical and conforming amendments related to
the rescission of Form N–Q and the adoption of
Form N–PORT. See id. at 81965–66.
31 See
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occurred during the most recent fiscal
half-year, rather than the registrant’s
most recent fiscal quarter as currently
required.34
As a result of this delay of the
compliance date for filing reports on
Form N–PORT for smaller fund groups
by nine months, smaller fund groups
will now satisfy their final filing
requirements for Form N–Q by May 1,
2020. We are therefore delaying the
effective date for the rescission of Form
N- Q until May 1, 2020.35
Correspondingly, the compliance dates
for the amendments to the certification
requirements of Form N–CSR will be
March 1, 2019, for larger fund groups,
and March 1, 2020, for smaller fund
groups.36
E. Six-Month Nonpublic Reporting
Period
In the Adopting Release, the
Commission determined that having a
six-month time period where larger
fund groups are required to file reports
on Form N–PORT with the Commission,
but where those reports are not
disclosed publicly, will allow funds and
the Commission to make adjustments to
fine-tune the technical specifications
and data validation processes.37
Because larger fund groups will now be
required to submit the reports on
EDGAR as of March 31, 2019, those
reports for the periods ending March 31,
2019 through September 30, 2019 will
be kept nonpublic to preserve the sixmonth period noted above.38 As before,
34 See supra note 1, at Part II.B.2; see also
Investment Company Reporting Modernization
Frequently Asked Questions, available at https://
www.sec.gov/investment/investment-companyreporting-modernization-faq#_ftnref5.
35 Money market funds currently file reports on
Form N–Q, but upon its rescission will not have to
file reports on Form N–PORT (as money market
funds currently file monthly reports on Form N–
MFP). While the Commission is extending the
effective date for the rescission of Form N–Q until
May 1, 2020, money market funds that were relying
on the Commission’s original August 1, 2019
rescission date for Form N–Q do not have to file
reports on Form N–Q after August 1, 2019 despite
the new rescission date of May 1, 2020.
36 We are also delaying the effective date for the
corresponding amendments to references to the
availability of portfolio holdings schedules in Form
N–1A, N–2, and N–3 and the amendments to
remove references to Form N–Q in rule 401 of
Regulation S–T and rules 8b–33, 30a–2, 30a–3, and
30d–1 under the Investment Company Act, to May
1, 2020, the same day the rescission of Form N–Q
will now be effective.
37 See Adopting Release, supra note 1, Part II.H.1.
38 As in the Adopting Release, here, smaller fund
groups will not be required to file reports on Form
N–PORT through the EDGAR system until after the
six-month nonpublic period for larger fund groups
has elapsed. This will allow smaller fund groups to
benefit from any adjustments to fine-tune the
technical specifications and data validation
processes that occurred during the six-month
nonpublic period for larger fund groups.
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portfolio information attached as
exhibits to Form N–PORT for the first
and third quarters of a fund’s fiscal year
will still be made public during this
period, to ensure that information about
funds’ portfolio holdings continues to
be publicly available to investors and
other users during the six-month period
when reports on Form N–PORT will not
be made publicly available.39
F. Form N–CEN
We note that our action today does
not affect requirements with respect to
Form N–CEN.40 Because those reports
will be immediately made public upon
filing and because their annual
frequency of filing and their smaller size
are expected to impose fewer demands
on the EDGAR system, we have
determined not to change the
submission requirements with respect to
that form at this time.
G. Procedural and Other Matters
The Administrative Procedure Act
(‘‘APA’’) generally requires an agency to
publish notice of a rulemaking in the
Federal Register and provide an
opportunity for public comment.41 This
requirement does not apply, however, if
the agency ‘‘for good cause finds . . .
that notice and public procedure
thereon are impracticable, unnecessary,
or contrary to the public interest.’’ 42 We
have determined to immediately adopt
this temporary rule delaying the
requirement that funds file reports on
Form N–PORT through the EDGAR
system for nine months and making the
accompanying changes described above.
The Commission has determined that
the range of potential technological
matters accompanying the ongoing and
anticipated improvements to the
EDGAR system warrant a delay in
accepting this entirely new set of
EDGAR filings, which involve complex
structured data files, until after the
EDGAR upgrades that are underway are
tested. This judgment is based on the
Commission’s ongoing, internal
assessment of the range of potential
modifications to enhance the EDGAR
system’s functionality, performance,
and security. Accordingly, we have
concluded that soliciting public
comment on this issue would be neither
necessary, practicable, nor in the public
interest.
In addition, providing immediate
certainty to funds is critical because we
39 See
Adopting Release, supra note 1, Part II.H.1.
N–CEN [referenced in 17 CFR 274.101]
under the Investment Company Act. Accordingly,
the rescission of Form N–SAR will not be delayed
by this action.
41 See 5 U.S.C. 553(b)–(c).
42 5 U.S.C. 553(b)(3)(B).
40 Form
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understand that funds are currently
organizing their systems and procedures
to comply with the requirements and
dates set forth in the Adopting Release.
Funds need to know that there will be
a nine-month delay of the requirement
that they file reports on Form N–PORT
through the EDGAR system, and that as
a result they will have to maintain their
systems for filing reports on Form N–Q
longer than contemplated in the
Adopting Release. The Commission is
concerned, for example, that absent the
certainty provided by a final rule funds
may eliminate those systems as part of
the transition to Form N–PORT.
Providing notice and comment would
defeat this goal of giving certainty as to
funds’ obligations in light of the
necessary delays stemming from the
Commission’s recent cybersecurity
initiatives. Under these circumstances,
notice and comment would be both
impracticable and contrary to the public
interest.
For these reasons, the Commission
finds that good cause exists to dispense
with notice and comment regarding the
delay of the requirement to submit
reports on Form N–PORT on EDGAR
and the associated changes outlined
above.43
II. Economic Analysis
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A. Introduction
The Commission is sensitive to the
economic effects, including the benefits
and costs and the effects on efficiency,
competition, and capital formation that
will result from this temporary final rule
and from the nine-month delay of the
requirement that funds submit reports
on Form N–PORT through EDGAR, the
associated delay for the same period of
the rescission of Form N–Q, the delay of
the semi-annual certification
requirement in Form N–CSR, the delay
of the effectiveness of certain
amendments to other rules and forms,
and the change in the six-month period
during which filed reports on Form N–
PORT with the Commission will be kept
nonpublic.44
43 See Section 553(b)(3)(B) of the Administrative
Procedure Act (5 U.S.C. 553(b)(3)(B)) (an agency
may dispense with prior notice and comment when
it finds, for good cause, that notice and comment
are ‘‘impracticable, unnecessary, or contrary to the
public interest’’). This finding also satisfies the
requirements of 5 U.S.C. 808(2), allowing the
amendments to become effective notwithstanding
the requirement of 5 U.S.C. 801 (if a federal agency
finds that notice and public comment are
impractical, unnecessary or contrary to the public
interest, a rule shall take effect at such time as the
federal agency promulgating the rule determines).
The amendments also do not require analysis under
the Regulatory Flexibility Act. See 5 U.S.C. 604(a).
44 See Parts I.C, I.D, and I.E for the specific
framework of the nine-month delay in the
submission of Form N–PORT on EDGAR.
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The Commission relies on
information included in reports filed by
funds to monitor trends, identify risks,
and inform its regulatory functions.
Similarly, investors and other market
participants rely on funds’ public filings
to assist in their investment decisions
and understanding of financial markets.
Form N–PORT, which requires
reporting of a fund’s complete portfolio
holdings on a monthly basis with every
third month available to the public, will
contribute substantially to information
made available to the Commission and
the public by funds. As the Commission
has previously stated,45 the adoption of
Form N–PORT will modernize fund
reporting, improve the ability of the
Commission to fulfill its regulatory
functions, and allow investors to make
more informed investment decisions.
The Commission has now determined
to delay the requirement that funds
submit Form N–PORT through the
EDGAR system by nine months to
provide time to complete the necessary
adjustments to the technical
specifications and data validation
processes and to complete the necessary
functionality, performance, and security
enhancements. The Commission’s
implementation of this delay, while
facilitating changes to the EDGAR
system, will impose certain costs on
market participants, including costs
associated with delayed access to
structured portfolio holdings data, costs
associated with continuing to file Form
N–Q, and recordkeeping costs
associated with Form N–PORT for larger
fund groups. The economic effects of
the delay are discussed in more detail
below.
B. Economic Baseline
The current required reporting of
information by funds (e.g., reports on
Forms N–Q, N–CSR, and N–SAR), as
well as the changes in reporting and
disclosure brought by the adoption of
Form N–PORT, serve as the baseline
against which the costs and benefits as
well as the impact on efficiency,
competition, and capital formation are
discussed.46 Additionally, the baseline
takes into account the fact that some
funds likely have started updating their
systems and processes to comply with
the new Form N–PORT requirements
adopted in October 2016.
The entities affected by the delay of
the EDGAR submission requirement for
reports on Form N–PORT are generally
the funds that will report using Form N–
PORT; those entities that currently
45 See Adopting Release, supra note 1, at 81870,
81872.
46 See Adopting Release, supra note 1, at 81969.
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58735
report using Form N–Q and would have
ceased doing so as of the applicable
Form N–PORT compliance date; and
those entities that will rely on either
filed information, including the
Commission and current and future
users of investment company portfolio
information including investors, thirdparty information providers, and other
interested potential users.
As of the end of 2016, approximately
95.8 million individuals owned shares
of registered investment companies,
representing 55.9 million or 44.4% of
U.S. households.47 We estimate that, as
of the end of 2016, there were 17,072
funds registered with the Commission,
of which 11,548 are required to file
Form N–PORT (i.e., 9,090 mutual funds
(excluding money market funds), 1,716
ETFs (including eight ETFs organized as
UITs and 1,708 ETFs that are
management investment companies),
and 742 closed-end funds (excluding
SBICs)).48 Of the fund groups required
to file Form N–PORT, 68.9% of fund
groups, representing 0.6% of all fund
assets, have net assets below $1 billion.
We also estimate that there are 11,540
funds that currently report on Form N–
Q and will be required to report on
Form N–PORT,49 all of which would
have ceased reporting on Form N–Q as
of the applicable Form N–PORT
compliance date(s).50
C. Economic Impacts
We are mindful of the costs and
benefits of the delay in filings on Form
N–PORT, the new recordkeeping
requirement, and the associated delays
in the effectiveness of certain
amendments and rescissions. The
Commission notes that, where possible,
it has sought to quantify the benefits
and costs, and effects on efficiency,
competition, and capital formation
expected to result from the delay in the
date for submitting Form N–PORT on
EDGAR, the related delay in the
rescission of Form N–Q, and the other
changes made in this release. However,
the Commission is unable to quantify
47 2017 Investment Company FactBook (‘‘2017 IC
FactBook’’), A Review of Trends and Activities in
the Investment Company Industry, 57th edition, at
2, available at https://www.ici.org/pdf/2017_
factbook.pdf.
48 Based on data obtained from the 2017 IC
FactBook and registrants’ filings with the
Commission on Form N–SAR as of the end of 2016.
49 11,540 is equal to 11,548 funds that are
required to file Form N–PORT minus 8 ETFs
organized as UITs that are required to file Form N–
PORT but are not required to file form N–Q.
Estimates are based on staff analysis of data
obtained from Morningstar Direct, as of December
31, 2016.
50 Based on data obtained from the 2017 IC
FactBook and registrants’ filings with the
Commission on Form N–SAR as of the end of 2016.
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many of the economic effects because it
lacks information necessary to provide
reasonable estimates. Effects that we are
unable to quantify include the extent to
which investors would be able to use
the information in Form N–PORT to
make more informed investment
decisions either through direct use or
through third-party service providers.
1. Economic Impacts of Delay in Form
N–PORT EDGAR Submission
Requirement
The EDGAR submission requirement
was designed to enhance the
Commission’s ability to access
efficiently and timely monthly
investment portfolio information of a
large number of funds in a structured
format, and to also enhance investors’
ability to make more informed
investment decisions. The delay in the
requirement to submit Form N–PORT
on EDGAR will benefit reporting funds
as well as funds’ current and
prospective investors, because it will
allow the Commission time to make
progress in the EDGAR system review
and to implement and test resulting
modifications to the EDGAR system.51
This will allow the large amounts of
new, complex data to be submitted on
EDGAR with additional security
measures in place. This, in turn, will
help ensure that the information
contained in Form N–PORT, once
submitted to EDGAR, is readily
accessible and usable.
The Commission acknowledges,
however, that there are costs to a delay
in the receipt of Form N–PORT
information. The delay in the EDGAR
submission requirement could
potentially temporarily affect the
Commission’s ability to readily
incorporate Form N–PORT information
into its mission through better informed
policy decisions and oversight, more
specific guidance and comments in the
disclosure review process, and more
targeted examination and enforcement
efforts.52 This impact is likely mitigated,
however, because during the ninemonth delay in the EDGAR submission
requirement, larger fund groups must
still prepare and maintain in their
records the information that is required
to be included on Form N–PORT.53
Further, both smaller fund groups and
larger fund groups must also prepare
and submit reports on Form N–Q. There
is overlap between the information that
funds will continue to report on Form
N–Q and that required in Form N–
PORT; however, funds file Form N–Q in
a non-structured data format, file the
form less frequently, and report fewer
data points than on Form N–PORT.54
The nine-month delay of the EDGAR
submission requirement will also delay
the ability of current and future users of
investment company portfolio
information, including investors, thirdparty information providers, and
academics, to access additional publicly
available data in a structured format.
This delay in the Form N–PORT
submission will defer the increase in the
transparency of a fund’s investment
strategies and will also postpone the
increase in the ability of investors and
other potential users to more efficiently
identify the funds’ risk exposures,
differentiate investment companies
based on their investment strategies,
and make more informed investment
decisions. Any costs of such a
temporary delay are partially mitigated
by the fact that users of investment
company portfolio information will
continue to have access to relevant
investment company information via
the reports on Form N–Q and N–CSR for
the duration of the Form N–PORT
submission delay.
To the extent that the delay in the
requirement to submit Form N–PORT
on EDGAR for larger fund groups and
the delay in the requirement to file
Form N–PORT for smaller fund groups
change costs borne by fund groups,
these changes will come in the form of
a reduction in the cost of submitting
reports on Form N–PORT on EDGAR.
For larger fund groups, there will be a
cost saving associated with the ninesupra Part I.C.
detailed in the Adopting Release, Form N–
PORT requires additional information concerning
fund portfolio holdings that is not currently
required by Form N–Q. See Adopting Release,
supra note 1, at 81875–76. For example, Form N–
PORT requires reporting of additional information
relating to derivative investments. The form also
includes certain risk metric calculations that
measure a fund’s exposure and sensitivity to
changing market conditions, such as changes in
asset prices, interest rates, or credit spreads. Form
N–PORT also requires information about certain
fund transactions and activities such as securities
lending, repurchase agreements, and reverse
repurchase agreements, including information
regarding the counterparties to which the fund is
exposed in those transactions, as well as in overthe-counter derivatives transactions.
53 See
54 As
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51 To
the extent that the Commission’s EDGAR
review and modernization efforts during the ninemonth delay improve current data security for
nonpublic information posted on EDGAR, funds
will also benefit from efforts to strengthen the
Commission’s cybersecurity risk profile going
forward.
52 To the extent that larger fund groups do not
prepare and maintain their reports in XML format
during the delay period, the nine-month delay in
the EDGAR submission requirement could also
temporarily negatively affect the Commission
because fund reports will not be available in a
structured XML format that allows the Commission
staff to more efficiently review and analyze fund
portfolio information. See Adopting Release, supra
note 1, at 81876, 81906–7.
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month delay in the requirement to
prepare the funds’ systems to
accommodate the XML-based reports to
the extent those fund groups choose
another format to prepare and maintain
the information that is required to be
included in Form N–PORT during the
delay period.55 For smaller fund groups,
there will be a cost saving associated
with the nine-month delay in both
preparing and submitting reports on
Form N–PORT on EDGAR.
Based on the cost estimates in the
Adopting Release for compiling and
submitting Form N–PORT on EDGAR,
we believe that the cost savings for
larger fund groups associated with the
delay in submitting Form N–PORT on
EDGAR and the delay in preparing the
funds’ systems to accommodate the
XML Form N–PORT format requirement
will be minimal. While filing with the
Commission is delayed for nine months,
temporary rule 30b1–9(T) will still
require larger fund groups to compile
the information that is required to be
included in Form N–PORT during the
nine months that the EDGAR
submission requirement is delayed and
these funds will incur the additional
cost of maintaining the information
required by Form N–PORT in the funds’
records in an easily accessible place as
required by the temporary final rule. We
believe that the cost savings for smaller
fund groups associated with the delay in
preparing and submitting Form N–
PORT on EDGAR for nine months will
be likely higher compared to the cost
savings for larger fund groups. These
cost savings likely comprise a ninemonth deferral of initial costs associated
with preparing the necessary systems
and processes for Form N–PORT filings
and a reduction in ongoing costs
associated with preparing, reviewing,
and filing reports on Form N–PORT for
nine months.56 Finally, for both larger
and smaller funds groups, the proposed
delay will temporarily defer costs
associated with the public release of
information that was previously held
private.57
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55 This cost saving comprises a deferral of initial
costs because larger fund groups must prepare their
systems to accommodate the XML-based reports
with a nine-month delay and a reduction in ongoing
costs because larger fund groups have to
accommodate the XML-based reports for nine
months less. It is possible that certain funds have
already started preparing their systems and
processes to accommodate the Form N–PORT
requirements adopted in October 2016. Any cost
reductions and deferrals for those funds are likely
lower.
56 See Adopting Release supra note 1, footnotes
1300–1304 for details on the initial and ongoing
costs associated with preparing, reviewing, and
filing reports on Form N–PORT.
57 Such costs include potential ‘‘front-running,’’
‘‘predatory trading,’’ and ‘‘copycatting/reverse
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2. Economic Impacts of Delay in Form
N–Q Rescission
The nine-month delay in the Form N–
PORT submission on EDGAR likely
imposes additional costs to funds
required to file reports on Form N–Q for
an additional nine months. First, the
requirement to submit Form N–Q for an
additional nine months as well as
prepare and maintain the information
that is required to be included in a
larger fund group’s report on Form N–
PORT will impose filing costs for Form
N–Q and some duplicative preparation
and recordkeeping costs on larger fund
groups that will be required to prepare
and maintain information that is
included in both forms. Using estimates
from the Adopting Release, we calculate
that preparing and filing Form N–Q
imposes annual total cost of $78,518,160
for all funds, or $6,804 per fund
annually.58 However, because
substantially all of Form N–Q questions
have been incorporated into Form N–
PORT, we estimate that much of the
estimated burden encompasses the cost
of gathering and preparing relevant data
as well as developing or maintaining the
systems and records to generate the data
that will be required by both forms. As
a result, the additional costs of
preparing and filing Form N–Q during
the nine-month delay will likely be
administrative in nature, and small in
relation to the costs that funds already
bear for preparing and reviewing Form
N–PORT.59
Second, the delay in the Form N–
PORT submission requirement will
impose an additional cost on funds that
must continue seeking certification of
engineering of trading strategies’’ by other investors
as well as the public release of previously private
and sensitive information, such as the identities
and weights of all of the individual components in
custom baskets or indexes comprising the reference
instruments underlying the fund’s derivative
investments, information regarding fees and
financing terms for certain derivatives contracts,
information regarding the variable financing rates
for swaps that pay or receive financing payments,
and the reporting of distressed debt issued by
private companies. See Adopting Release, supra
note 1, at 81977–80.
58 The estimated annual cost per-fund is based
upon the following calculations: $6,804 = 21 hours/
fund × $324/hour compensation for professionals
commonly used in preparation of Form N–Q filings.
($324 = ($308 per hour for senior programmers +
$340 per hour for compliance attorneys) ÷ 2 (as half
of the time will be performed by senior
programmers and half by compliance attorneys)), as
we believe these employees would commonly be
responsible for completing reports on Form N–Q.
The estimated annual total cost is based on the
following calculation: $78,518,160 = $6,804 annual
per fund cost × 11,540 funds. Funds are currently
required to file a quarterly report on Form N–Q after
the close of the first and third quarters of each fiscal
year. See Adopting Release, supra note 1, at 81998.
59 See Adopting Release, supra note 1, at page
81975.
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the Form N–Q for nine more months
until Form N–Q is rescinded.60 As
mentioned above, once Form N–Q is
rescinded, the certifying officer will be
required to state that he or she has
disclosed in Form N–CSR any change in
the registrant’s internal control over
financial reporting that occurred during
the most recent fiscal half-year rather
than the most recent quarter to fill the
gap in certification coverage that would
otherwise occur once Form N–Q is
rescinded. Nevertheless, we believe any
additional certification costs arising
from the delay in the Form N–Q
rescission will be minimal.61
3. Analysis of Effects on Efficiency,
Competition, and Capital Formation
Market participants rely on the ability
of EDGAR to perform effectively in
order to provide the Commission and
investors with timely reporting. The
Commission prioritizes a secure and
fully functional EDGAR for receiving
information about its registrants and
providing that information to market
participants. The delay in the Form N–
PORT submission requirement and the
resulting delay in the Form N–Q
rescission will provide the Commission
with time to make progress in the
EDGAR system review and to
implement and test resulting
modifications to the EDGAR system to
allow EDGAR to accept new, large, and
complex structured data disclosures
made by funds effectively, with
additional security measures in place,
thereby facilitating the ready
accessibility of the disclosures by
investors and other market participants.
The Commission acknowledges,
however, that the delay will temporarily
prevent the Commission, investors, and
other market participants from accessing
the more comprehensive and structured
portfolio information that would be
made available by funds filing Form N–
PORT. The enhanced disclosures in
60 On the other hand, the proposed delay in the
Form N–Q rescission will also temporarily defer for
some funds any costs associated with the rescission
of Form N–Q, depending on a particular fund’s
fiscal year. In particular, the rescission of Form N–
Q will eliminate certifications of the accuracy of the
portfolio schedules reported for the first and third
fiscal quarters and funds will only certify their
disclosure controls and procedures and internal
control over financial reporting in Form N–CSR
semi-annually. To the extent that Form N–Q’s
certifications about the accuracy of portfolio
holdings improve the accuracy of the data reported
during the first and third quarters, reducing the
frequency of certifications from quarterly to
semiannually could affect the quality of the data
reported. The delay in the rescission of Form N–Q
could thus delay the potential cost of reduced data
quality due to the reduction in the data certification
frequency.
61 See Adopting Release, supra note 1, at 81975,
82005.
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58737
Form N–PORT would allow the
Commission to better monitor industry
trends and identify industry outliers,
provide guidance and comments to
improve disclosure, identify risks,
inform policy and rulemaking, and
assist the Commission in its oversight
efforts. The enhanced disclosures in
Form N–PORT would also allow
investors and other market participants
to more efficiently analyze investment
portfolio information, better
differentiate investment companies
based on their investment strategies and
other activities, select funds based on
security selection, industry focus, level
of diversification, and the use of
leverage and derivatives. The enhanced
disclosures therefore would ultimately
allow investors to allocate capital across
reporting funds more in line with their
risk preferences and increase the
competition among funds for investor
capital. Hence, the delay in the Form N–
PORT submission requirement might
temporarily negatively impact investors;
the fair, orderly, and efficient
functioning of the markets; and capital
formation. Importantly, however, this
temporary negative impact is mitigated
by delaying the rescission of Form N–
Q until May 1, 2020 so that funds will
continue to provide some fund portfolio
holdings information on Form N–Q.
The delay may have an incremental
competitive effect on larger fund groups,
which remain subject to the requirement
to prepare the information required by
Form N–PORT and Form N–Q, but to
retain the former and submit the latter,
for an additional nine months, while
smaller fund groups are not subject to
the costs of preparing and retaining the
information required by Form N–PORT.
These effects are likely small, given the
relative size of the larger fund groups to
the smaller fund groups and will only
last for nine months.
D. Alternatives
As an alternative to the nine-month
delay of the EDGAR submission
requirement for reports on Form N–
PORT, we considered a longer or shorter
delay period. While a shorter period
would have reduced the costs to the
Commission and other current and
future users of investment company
portfolio information of not receiving
investment portfolio information in a
more timely manner, the Commission
believes that a shorter period would be
inadequate for review and testing of the
EDGAR system’s ability to validate and
accept Form N–PORT filings effectively.
At this time, the Commission also
believes that a longer period is not
necessary and would increase the costs
to the Commission and other users of
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investment company portfolio
information.
As an alternative to the tiered EDGAR
submission requirement on Form N–
PORT for larger and smaller fund
groups, we considered a nine-month
delay in the Form N–PORT submission
requirement only for larger fund groups.
Such a delay would not allow smaller
fund groups to benefit from the extra
time to comply with the new
requirements and potentially benefit
from the lessons learned by larger fund
groups. As discussed above, we are not
revisiting the decision made in the
Adopting Release to maximize the
potential for smaller fund groups (and
any external vendors that would be used
by both larger and smaller fund groups)
to benefit from lessons learned by larger
fund groups, and therefore we are
preserving a tiered requirement for the
Form N–PORT EDGAR submission
process.62 Relatedly, similar to larger
fund groups, we considered requiring
smaller fund groups to prepare and
maintain records of the information that
is required to be included in Form N–
PORT during the delay. However,
delaying the filing requirement for
smaller fund groups allows them to
benefit from the lessons learned by
larger fund groups in preparing and
filing Form N–PORT on EDGAR as
discussed in the Adopting Release.63
As an alternative to the delay in the
rescission of Form N–Q, we considered
not delaying the rescission of Form N–
Q while delaying the N–PORT EDGAR
submission requirement by nine
months. Such an alternative would
decrease the information that is
available to the Commission and various
market participants, such as investors,
about fund portfolio performance. Such
a reduction in information availability
could adversely impact investors,
market efficiency, and capital formation.
We did not revisit the decision made
in the Adopting Release to require that
funds prepare the information that must
be included on Form N–PORT by June
1, 2018 for larger fund groups. The sole
purpose of the nine-month delay is to
allow the Commission time to make
progress in the EDGAR system review
and to implement and test resulting
modifications to the EDGAR system to
allow EDGAR to accept new, large, and
complex structured data disclosures
made on Form N–PORT by funds
effectively, with additional security
measures in place.
62 See
63 See
supra Part I.C.
Adopting Release, supra note 1, at 81966.
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Jkt 244001
III. Paperwork Reduction Act
The Commission is delaying the
requirement to submit reports on Form
N–PORT on the EDGAR system by nine
months for larger fund groups from July
30, 2018 to April 30, 2019 and for
smaller fund groups from July 30, 2019
to April 30, 2020. The Commission is
also adopting rule 30b1–9(T) that
requires funds in larger fund groups to
maintain in their records the
information required in Form N–PORT
during that nine-month delay. In
addition, the Commission is delaying
the rescission of current Form N–Q and
delaying the effectiveness of certain
amendments to other rules and forms.
We do not believe that any of these
changes will make any substantive
modifications to any existing collection
of information requirements within the
meaning of the Paperwork Reduction
Act of 1995 (‘‘PRA’’).64
A. Form N–PORT
Rule 30b1–9(T) will require larger
fund groups, during the nine-month
delay, to satisfy their reporting
obligation by maintaining in their
records the information required to be
included in Form N–PORT instead of
submitting the information via EDGAR.
We believe that the burden associated
with preserving the information
required by Form N–PORT in the fund’s
records in an easily accessible place is
similar to the burden associated with
submitting the prepared report on
EDGAR. Moreover,we believe that some
of the burden for smaller fund groups
associated with filing Form N–PORT
will be deferred for nine months, but
because many of the burdens associated
with preparing Form N–PORT will be
incurred by funds before then, we
believe that there will be no substantive
modification to the existing collection of
information for Form N–PORT. As a
result, the Commission believes that the
current PRA burden estimates for the
existing collection of information
requirements remain appropriate.65
B. Rescission of Form N–Q
As discussed in the Adopting Release,
in connection with our adoption of
Form N–PORT, we determined to
rescind Form N–Q effective August 1,
2019 in order to eliminate unnecessarily
duplicative reporting requirements once
smaller funds began reporting on Form
N–PORT.66 The rescission of Form N–Q
will affect all management investment
64 44
U.S.C. 3501 through 3521.
N–PORT Under the Investment
Company Act, Monthly Portfolio Investments
Report’’ (OMB Control No. 3235–0730).
66 Adopting Release, supra note 1, at 81998.
65 ‘‘Form
PO 00000
Frm 00032
Fmt 4700
Sfmt 4700
companies required to file reports on
the form. Because larger fund groups
that are subject to rule 30b1–9(T) will be
required to file public reports on Form
N–Q at the time they prepare and
preserve the information required by
Form N–PORT, these requirements
include certain requirements that are
duplicative, though they will not
involve duplicative public reporting
requirements. Because we are delaying
the effective date of the rescission of
Form N–Q by nine months to May 1,
2020, the burden reduction we
estimated will be realized nine months
later than contemplated by the Adopting
Release. As a result, the Commission
believes that the current PRA burden
estimates for the existing collection of
information requirements remain
appropriate.67
C. Registration Statement Forms
We are delaying the effective date of
technical and conforming changes to
Forms N–1A, N–2, and N–3 referring to
the availability of portfolio holdings
schedules to May 1, 2020, the same day
the rescission of Form N–Q will now be
effective.
In the Adopting Release, we did not
estimate a change to burden hours or the
external costs related to the technical
and conforming amendments related to
the availability of portfolio holdings
schedules. Therefore, we do not believe
that there is a change to burden hours
or the external costs resulting from the
delay of the effective date of these
amendments. Accordingly, the
Commission believes that the current
PRA burden estimates for the existing
collection of information requirements
remain appropriate.68
D. Amendments to Form N–CSR
As discussed in the Adopting Release,
in connection with the rescission of
Form N–Q, we also adopted
amendments to Form N–CSR, the
reporting form used by management
companies to file certified shareholder
reports under the Investment Company
Act and the Exchange Act.69
67 ‘‘Form N–Q—Quarterly Schedule of Portfolio
Holdings of Registered Management Investment
Company’’ (OMB Control No. 3235–0578).
68 ‘‘Form N–1A under the Securities Act of 1933
and under the Investment Company Act of 1940,
Registration Statement of Open-End Management
Investment Companies’’ (OMB Control No. 3235–
0307); ‘‘Form N–2 under the Investment Company
Act of 1940 and Securities Act of 1933, Registration
Statement of Closed-End Management Investment
Companies’’ (OMB Control No. 3235–0026); and
‘‘Form N–3 Under the Investment Company Act of
1940, Registration Statement of Separate Accounts
Organized as Management Investment Companies’’
(OMB Control No. 3235–0316).
69 Adopting Release, supra note 1, at 82004.
Compliance with the certification requirements will
E:\FR\FM\14DER1.SGM
14DER1
Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Rules and Regulations
In the Adopting Release, we estimated
that the amendments to the certification
requirements of Form N–CSR would not
change the annual hour burden or
external costs associated with Form N–
CSR.70 Therefore, we do not believe that
there is a change to burden hours or the
external costs resulting from the delay
of the effective date of these
amendments. Accordingly, the
Commission believes that the current
PRA burden estimates for the existing
collection of information requirements
remain appropriate.71
IV. Statutory Authority
We are adopting the rules contained
in this document under the authority set
forth in the Securities Act [15 U.S.C. 77a
et seq.], the Exchange Act, particularly
sections 10, 13, 15, 23, and 35A thereof
[15 U.S.C. 78a et seq.], the Investment
Company Act, particularly sections 8,
30, 31, and 38 thereof [15 U.S.C. 80a et
seq.], and 44 U.S.C. 3506.
List of Subjects
§ 270.30b1–9(T)
monthly report.
Temporary rule regarding
(a) Until April 1, 2019, each registered
management investment company
subject to § 270.30b1–9 of this chapter
must satisfy its reporting obligation
under that section by maintaining in its
records the information that is required
to be included in Form N–PORT
(§ 274.150 of this chapter).
(b) The information maintained in the
registered management investment
company’s records under paragraph (a)
of this section shall be treated as a
record under section 31(a)(1) of the Act
[15 U.S.C. 80a–30(a)(1)] and § 270.31a–
1(b) of this chapter subject to the
requirements of § 270.31a–2(a)(2) of this
chapter.
(c) This section will expire and no
longer be effective on March 31, 2026.
By the Commission.
Dated: December 8, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017–26922 Filed 12–13–17; 8:45 am]
17 CFR Part 232
BILLING CODE 8011–01–P
Administrative practice and
procedure, Reporting and recordkeeping
requirements, Securities.
DEPARTMENT OF DEFENSE
17 CFR Part 239
Office of the Secretary
Reporting and recordkeeping
requirements, Securities.
32 CFR Part 232
17 CFR Part 249
[Docket ID: DOD–2017–OS–0038]
Reporting and recordkeeping
requirements, Securities.
RIN 0790–ZA13
17 CFR Parts 270 and 274
Investment companies, Reporting and
recordkeeping requirements, Securities.
For reasons set forth in the preamble,
title 17, chapter II of the Code of Federal
Regulations is amended as follows:
PART 270—RULES AND
REGULATIONS, INVESTMENT
COMPANY ACT OF 1940
1. The authority citation for part 270
continues to read, in part, as follows:
Authority: 15 U.S.C. 80a–1 et seq., 80a–
34(d), 80a–37, 80a–39, and Pub. L. 111–203,
sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
*
*
*
*
*
2. Section 270.30b1–9(T) is added to
read as follows:
sradovich on DSK3GMQ082PROD with RULES
■
be mandatory, and responses are not kept
confidential.
70 Id. at 82005.
71 ‘‘Form N–CSR under the Securities Exchange
Act of 1934 and under the Investment Company Act
of 1940, Certified Shareholder Report of Registered
Management Investment Companies’’ (OMB Control
No. 3235–0570).
15:57 Dec 13, 2017
Jkt 244001
Under Secretary of Defense for
Personnel and Readiness, Department of
Defense.
ACTION: Interpretive rule; amendment.
AGENCY:
The Department of Defense
(Department) is amending its
interpretive rule for the Military
Lending Act (the MLA). The MLA, as
implemented by the Department, limits
the military annual percentage rate
(MAPR) that a creditor may charge to a
maximum of 36 percent, requires certain
disclosures, and provides other
substantive consumer protections on
‘‘consumer credit’’ extended to Service
members and their families. On July 22,
2015, the Department amended its
regulation primarily for the purpose of
extending the protections of the MLA to
a broader range of closed-end and openend credit products (the July 2015 Final
Rule). On August 26, 2016, the
Department issued the first set of
interpretations of that regulation in the
form of questions and answers; the
SUMMARY:
■
VerDate Sep<11>2014
Military Lending Act Limitations on
Terms of Consumer Credit Extended to
Service Members and Dependents
PO 00000
Frm 00033
Fmt 4700
Sfmt 4700
58739
present interpretive rule amends and
adds to those questions and answers to
provide guidance on certain questions
the Department has received regarding
compliance with the July 2015 Final
Rule.
DATES: Effective Date: This interpretive
rule is effective December 14, 2017.
FOR FURTHER INFORMATION CONTACT:
Andrew Cohen, 703–692–5286.
SUPPLEMENTARY INFORMATION:
I. Background and Purpose
In July 2015, the Department of
Defense (Department) issued a final
rule 1 (July 2015 Final Rule) amending
its regulation implementing the Military
Lending Act (MLA) 2 primarily for the
purpose of extending the protections of
the MLA to a broader range of closedend and open-end credit products,
rather than the limited credit products
that had been defined as ‘‘consumer
credit.’’ 3 Among other amendments, the
July 2015 Final Rule modified
provisions relating to the optional
mechanism a creditor may use when
assessing whether a consumer is a
‘‘covered borrower,’’ modified the
disclosures that a creditor must provide
to a covered borrower, and implemented
the enforcement provisions of the MLA.
Subsequently, the Department
received requests to clarify its
interpretation of points raised in the
July 2015 Final Rule. The Department
elected to inform the public of its views
by issuing an interpretive rule in the
form of questions and answers to assist
industry in complying with the July
2015 Final Rule. The Department issued
the first set of such interpretations on
August 26, 2016 (August 26, 2016
Interpretive Rule).4 The present
interpretive rule amends and adds to
those questions and answers. This
interpretive rule does not change the
regulation implementing the MLA, but
merely states the Department’s
preexisting interpretations of an existing
regulation. Therefore, under 5 U.S.C.
553(b)(A), this rulemaking is exempt
from the notice and comment
requirements of the Administrative
Procedure Act, and, pursuant to 5 U.S.C.
553(d)(2), this rule is effective
immediately upon publication in the
Federal Register.
II. Interpretations of the Department
The following questions and answers
represent official interpretations of the
Department on issues related to 32 CFR
1 80
FR 43560 (July 22, 2015).
U.S.C. 987.
3 32 CFR 232.3(b) as implemented in a final rule
published at 72 FR 50580 (Aug. 31, 2007).
4 81 FR 58840 (August 26, 2016).
2 10
E:\FR\FM\14DER1.SGM
14DER1
]]>Agencies
[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Rules and Regulations]
[Pages 58731-58739]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26922]
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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 232, 239, 249, 270, and 274
[Release Nos. 33-10442; 34-82241; IC-32936; File No. S7-08-15]
RIN 3235-AL42
Investment Company Reporting Modernization
AGENCY: Securities and Exchange Commission.
ACTION: Temporary final rule.
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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
adopting a temporary final rule that requires funds in larger fund
groups to maintain in their records the information that is required to
be included in Form N-PORT, in lieu of filing reports with the
Commission, until April 2019. As a result, larger funds groups will be
required to begin submitting reports on Form N-PORT on the Electronic
Data Gathering, Analysis, and Retrieval (``EDGAR'') system by April 30,
2019, and smaller fund groups will be required to begin submitting
reports on Form N-PORT by April 30, 2020. The information that funds in
larger fund groups maintain in their records will be subject to
examination by the Commission. In addition, the Commission is delaying
the rescission of current Form N-Q and delaying the effectiveness of
certain amendments to other rules and forms.
DATES: Effective January 16, 2018 until March 31, 2026. The effective
date for the amendments to 17 CFR 232.401, 249.332, 270.8b-33, 270.30a-
2,
[[Page 58732]]
270.30a-3, 270.30b1-5, and 17 274.130 and in Instructions 54, 57, 59,
and 61 in the final rule published at 81 FR 81870 on November 18, 2016,
is delayed until May 1, 2020. The applicable compliance dates are
discussed below.
FOR FURTHER INFORMATION CONTACT: J. Matthew DeLesDernier, Senior
Counsel, Jacob D. Krawitz, Branch Chief, or Brian McLaughlin Johnson,
Assistant Director, at (202) 551-6792, Investment Company Rulemaking
Office, Division of Investment Management, Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Commission is adopting new temporary
rule 30b1-9(T) [17 CFR 270.30b1-9(T)] under the Investment Company Act
of 1940 [15 U.S.C. 80a-1 et seq.] (``Investment Company Act''). The
Commission is also delaying the compliance dates associated with the
requirement for smaller fund complexes to file reports on new Form N-
PORT [referenced in 17 CFR 274.150] under the Investment Company Act
[15 U.S.C. 80a-1 et seq.] and new rule 30b1-9 [17 CFR 270.30b1-9] under
the Investment Company Act. In addition, the Commission is delaying the
effective date associated with: the rescission of rule 30b1-5 [17 CFR
270.30b1-5] under the Investment Company Act; amendments to rules 8b-33
[17 CFR 270.8b-33], 30a-2 [17 CFR 270.30a-2], 30a-3 [17 CFR 270.30a-3],
and 30d-1 [17 CFR 270.30d-1] under the Investment Company Act;
amendments to Forms N-1A [referenced in 17 CFR 274.11A], N-2
[referenced in 274.11a-1], and N-3 [referenced in 274.11b] under the
Investment Company Act and the Securities Act of 1933 [15 U.S.C. 77a et
seq.] (``Securities Act''); the rescission of Form N-Q [referenced in
17 CFR 274.130] under the Investment Company Act and Securities
Exchange Act of 1934 [15 U.S.C. 78a et seq.] (``Exchange Act''); and
amendments to rule 401 [17 CFR 232.401] of Regulation S-T [17 CFR 232].
I. Discussion
In recognition of the importance of sound data security practices
and protocols for sensitive, nonpublic information, the Commission is
modifying its approach to the requirement to submit reports on Form N-
PORT on the EDGAR system. Funds in larger fund groups would have been
required to submit reports on Form N-PORT in EDGAR no later than July
30, 2018. The Commission is adopting a temporary final rule that
requires funds in larger fund groups to maintain in their records the
information that is required to be included in Form N-PORT beginning no
later than July 30, 2018. This information will be subject to
examination by Commission staff. As a result, funds in larger fund
groups must begin to submit reports on Form N-PORT on EDGAR by April
30, 2019, and smaller fund groups must begin to submit reports on Form
N-PORT by April 30, 2020. In addition, the Commission is delaying the
rescission of current Form N-Q and delaying the effectiveness of
certain amendments to other rules and forms.
A. Form N-PORT
On October 13, 2016, the Commission adopted new rules and forms as
well as amendments to its rules and forms to modernize the reporting
and disclosure of information by registered investment companies.\1\ In
particular, the Commission adopted new Form N-PORT, which requires
certain registered investment companies to report information about
their monthly portfolio holdings to the Commission in a structured data
format. We also adopted new Form N-CEN, which requires registered
investment companies, other than face-amount certificate companies, to
annually report certain census-type information to the Commission in a
structured data format. In addition, we rescinded current Forms N-Q
(effective August 1, 2019) and N-SAR and amended certain other rules
and forms.\2\
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\1\ Investment Company Reporting Modernization, Investment
Company Act Release No. 32314 (Oct. 13, 2016) [81 FR 81870 (Nov. 18,
2016)] (``Adopting Release'').
\2\ The Commission also adopted amendments to Regulation S-X,
which require standardized, enhanced disclosure about derivatives in
investment company financial statements, as well as other
amendments. Finally, it adopted amendments to Forms N-1A, N-3, and
N-CSR to require certain disclosures regarding securities lending
activities. Id.
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As the Commission stated in the Adopting Release, Form N-PORT, as
well as new rules, other forms, and amendments to existing rules and
forms will, among other things, improve the information that the
Commission receives from investment companies and assist the
Commission, in its role as primary regulator of investment companies,
to better fulfill its mission of protecting investors; maintaining
fair, orderly, and efficient markets; and facilitating capital
formation. Investors and other potential users can also utilize this
information to help them make more informed investment decisions.
Form N-PORT is a new portfolio holdings reporting form that will be
filed by all registered management investment companies, other than
money market funds and small business investment companies, and by unit
investment trusts that operate as exchange-traded funds (collectively,
``funds'').\3\ Form N-PORT requires reporting of a fund's complete
portfolio holdings and additional information that will facilitate risk
analysis and other Commission oversight. Reports on Form N-PORT are
required to be filed in an extensible markup language (``XML'')
structured data format no later than 30 days after the close of each
month using the Commission's EDGAR system.\4\ In general, reports on
Form N-PORT for every third month of each fiscal quarter will be
available to the public 60 days after the end of the fiscal quarter.\5\
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\3\ Form N-PORT.
\4\ See rule 30b1-9.
\5\ General Instruction F to Form N-PORT.
---------------------------------------------------------------------------
Certain information reported on Form N-PORT will be kept nonpublic.
As we noted in the Adopting Release, we recognize that more frequent
portfolio disclosure than was currently required could potentially harm
fund shareholders by expanding the opportunities for professional
traders to engage in predatory trading practices.\6\ In addition, some
of the information required by Form N-PORT could imply a false sense of
precision because such data, by design, are an aggregation of multiple
assumptions and projections.\7\ In light of these considerations, the
Commission in the Adopting Release determined not to make public the
information reported on Form N-PORT for the first and second months of
each fund's fiscal quarter that is identifiable to any particular fund
or adviser; any information reported with regards to country of risk
and economic exposure, delta, or miscellaneous securities; or
explanatory notes related to any of those topics that is identifiable
to any particular fund or adviser.\8\ In addition, the information on
Form N-PORT that will be made public will only be made public after an
additional 30-day delay (i.e., 60 days after quarter-end). Moreover, we
determined to make all reports for the first six months following June
1, 2018 nonpublic in order to allow funds and the Commission a period
of time to fine-tune the technical specifications and data validation
processes for reports on Form N-PORT.\9\
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\6\ See Adopting Release, supra note 1, Part II.A.4.
\7\ See id.
\8\ General Instruction F to Form N-PORT.
\9\ See Adopting Release, supra note 1, Part II.H.1.
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When we adopted the Form N-PORT filing requirement, we provided for
an effective date of January 17, 2017, with a tiered set of compliance
dates based
[[Page 58733]]
on a fund group's asset size. Specifically, for larger entities--funds
that together with other investment companies in the same ``group of
related investment companies'' have net assets of $1 billion or more as
of the end of the most recent fiscal year of the fund (``larger fund
groups'')--we adopted a compliance date of June 1, 2018.\10\ This would
have resulted in larger fund groups filing their first reports on Form
N-PORT, reflecting data as of June 30, no later than July 30, 2018.\11\
For smaller fund groups, we adopted a compliance date of June 1, 2019,
anticipating that smaller fund groups would benefit from this extra
time to comply and potentially would benefit from the lessons learned
by the larger fund groups during the adoption period for Form N-
PORT.\12\
---------------------------------------------------------------------------
\10\ Id.
\11\ Id.
\12\ Id.
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B. Commission's Determination To Delay Form N-PORT Filing Requirement
As we noted in the Adopting Release, we recognize the importance of
sound data security practices and protocols for sensitive, nonpublic
information, including information that may be competitively
sensitive.\13\ To that end, the Adopting Release acknowledged that
Commission staff was working to design controls and systems for the use
and handling of Form N-PORT data in a manner that reflects the
sensitivity of the data and is consistent with the maintenance of its
confidentiality.\14\ In the Adopting Release, the Commission also
stated that it ``expect[ed] that the staff will have reviewed the
controls and systems in place for the use and handling of nonpublic
information reported on Form N-PORT.'' \15\
---------------------------------------------------------------------------
\13\ See Adopting Release, supra note 1, Part II.A.3.
\14\ Id.
\15\ Id.
---------------------------------------------------------------------------
In May 2017, the Commission's Chairman initiated an assessment of
the Commission's internal cybersecurity risk profile and its approach
to cybersecurity.\16\ The Chairman also directed the staff to take a
number of steps designed to strengthen the Commission's cybersecurity
risk profile, with an initial focus on EDGAR.\17\ As the Chairman
explained, the Commission receives, stores, and transmits substantial
amounts of data, including sensitive and nonpublic data, in support of
its mission.\18\ Much of that data is collected through EDGAR, which
receives and processes over 1.7 million electronic filings per
year.\19\ Thus, as part of the Commission's efforts to strengthen its
cybersecurity risk profile going forward, the Commission has initiated
a focused review and, as necessary or appropriate, uplift of the EDGAR
system.\20\ The Commission has added, and expects to continue to add,
additional resources to these efforts, which are expected to include
outside consultants, and will increase the focus on data security
matters.\21\ As the Chairman has indicated, these efforts will require
substantial time and effort to complete.\22\
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\16\ Statement on Cybersecurity (September 20, 2017), available
at https://www.sec.gov/news/public-statement/statement-clayton-2017-09-20.
\17\ Update on Review of 2016 Cyber Intrusion Involving EDGAR
System (Oct. 2, 2017), available at https://www.sec.gov/news/press-release/2017-186.
\18\ Statement on Cybersecurity (Sept. 20, 2017), available at
https://www.sec.gov/news/public-statement/statement-clayton-2017-09-20.
\19\ Id.
\20\ Update on Review of 2016 Cyber Intrusion Involving EDGAR
System (Oct. 2, 2017), available at https://www.sec.gov/news/press-release/2017-186.
\21\ Id.
\22\ Id.
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Certain of these measures, which will be designed to improve
EDGAR's functionality and security, could negatively affect EDGAR's
ability to validate and accept Form N-PORT filings in a timely manner,
in particular during peak filing periods. Efforts to address any such
potential effects on performance are underway, but we have determined
to delay by nine months the requirement that funds file reports on Form
N-PORT through the EDGAR system in order to provide time to complete
this review and to implement and test any resulting modifications to
the EDGAR system.\23\ This delay of filing reports on Form N-PORT on
EDGAR is necessary for Commission staff to complete and review any
modifications to EDGAR that are necessary to process these filings
effectively and securely, given their frequency, volume, and
complexity, as well as the nonpublic nature of much of the data.
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\23\ The Commission has not considered any other changes to Form
N-PORT, rules, other forms, and amendments besides those that are
discussed in this release.
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C. Temporary Rule 30b1-9(T)
To effectuate the nine-month delay, we have determined to adopt
temporary rule 30b1-9(T), which will have the effect of delaying the
EDGAR submission requirements associated with Form N-PORT for larger
fund groups until April 2019. As a result, funds in larger fund groups
that previously would have been required to submit their first reports
on Form N-PORT on EDGAR for the period ending June 30, 2018 (no later
than July 30, 2018) will now be required to submit their first reports
on EDGAR by April 30, 2019.\24\ During this period, funds in larger
fund groups that are subject to the June 1, 2018 compliance date must
satisfy their reporting obligation by maintaining in their records the
information required to be included in Form N-PORT instead of
submitting the information via EDGAR.\25\ To provide for Commission
access to this information for a reasonable period of time, consistent
with current record retention requirements for registered investment
companies, the temporary rule provides that the information maintained
in the company's records shall be treated as a record under section 31
of the Investment Company Act and rule 31a-1 hereunder and subject to
the requirements of rule 31a-2.\26\ Like all fund records under the
Act, this information is subject to examination by Commission
staff.\27\ Temporary rule 30b1-9(T) does not change the June 1, 2018
compliance date adopted for Form N-PORT for larger fund groups--it
instead requires a temporary method for larger fund groups to fulfill
their Form N-PORT reporting obligations.\28\
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\24\ See Rule 30b1-9(T)(a).
\25\ Id. Furthermore, the EDGAR reporting requirements added to
Form N-PORT by the Investment Company Liquidity Risk Management
Programs Adopting Release (``Liquidity Adopting Release'') will also
be delayed by the temporary rule. See Investment Company Liquidity
Risk Management Program, Investment Company Act Release No. 32315
(Oct. 13, 2016) [81 FR 82142 (Nov. 18, 2016)]. However, funds will
only be required to comply with temporary rule 30b1-9(T) with
respect to these liquidity-related additions to Form N-PORT based on
the compliance date set forth in the Liquidity Adopting Release for
these additions.
\26\ See rule 31a-2(a)(2) (providing that funds must preserve
certain records for a period not less than six years from the end of
the fiscal year, the first two years in an easily accessible place);
see generally rule 31a-2(f) (requirements for electronic records).
Because rule 31a-2 provides for preservation for not less than six
years from the end of the fiscal year, the temporary rule will no
longer be effective March 31, 2026.
\27\ 15 U.S.C. 80a-30(b)(1).
\28\ See rule 30b1-9(T)(a). While neither this temporary rule
nor rule 31a-2(f) require that the information maintained in the
funds' records be stored in an XML format, we believe that doing so
would facilitate the filing of Form N-PORT following the nine-month
delay as we believe funds can use this delay to gain greater
facility with the structured reporting format.
---------------------------------------------------------------------------
The Adopting Release delayed compliance for smaller fund groups by
one year so that they could benefit from the lessons learned by the
larger fund groups' earlier compliance date.\29\ In order to maintain
this benefit the compliance date for smaller fund groups
[[Page 58734]]
will be delayed by nine months from the original compliance date (until
March 1, 2020). Not providing smaller fund groups with a compliance
date delay would deprive them of receiving the full benefit of the
tiered filing requirement that we previously adopted. However, the
temporary rule is not relevant to these smaller fund groups,\30\ as the
relevant provision of the temporary rule applies until April 1, 2019--
before the new compliance date for smaller fund groups (March 1, 2020).
As a result, smaller fund groups are not subject to a requirement to
prepare and then retain as a record the information required on Form N-
PORT; rather, they will, pursuant to the Adopting Release and this
release, need to prepare and file Form N-PORT beginning on or after the
delayed March 1, 2020 compliance date.
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\29\ See Adopting Release, supra note 1, at Part II.H.1.
\30\ See rule 30b1-9(T)(a).
---------------------------------------------------------------------------
D. Form N-Q Filing Requirement
In order for investors and other users to continue to receive at
the least the same information that they currently receive regarding
fund portfolio holdings, we are requiring funds to continue filing
public reports on Form N-Q until they begin filing reports on Form N-
PORT using EDGAR (i.e., the March 31, 2019 reporting period for larger
fund groups and March 31, 2020 for smaller fund groups). As the
Commission concluded in the Adopting Release, Form N-PORT will render
reports on Form N-Q unnecessarily duplicative. To that end, the
Commission staff recently provided guidance that once a fund begins
filing reports on Form N-PORT, it will no longer be required to file
reports on Form N-Q.\31\ The Adopting Release rescinded Form N-Q,
effective August 1, 2019. This effective date would have allowed funds
sufficient time to satisfy Form N-Q's 60-day filing requirement with
regard to their final filing on Form N-Q for the reporting period
preceding their first filing on Form N-PORT.\32\ We also adopted
certain changes to Form N-CSR to account for the rescission of Form N-
Q.\33\ Specifically, as we noted in the Adopting Release, when a fund
ceases filing reports on Form N-Q, its certification on Form N-CSR must
state that the certifying officer has disclosed any change in the
registrant's internal control over financial reporting that occurred
during the most recent fiscal half-year, rather than the registrant's
most recent fiscal quarter as currently required.\34\
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\31\ See Investment Company Reporting Modernization Frequently
Asked Questions, available at https://www.sec.gov/investment/investment-company-reporting-modernization-faq#_ftnref5.
\32\ Adopting Release, supra note 1, at 81966.
\33\ Id. at 81912-13. We also adopted certain technical and
conforming amendments related to the rescission of Form N-Q and the
adoption of Form N-PORT. See id. at 81965-66.
\34\ See supra note 1, at Part II.B.2; see also Investment
Company Reporting Modernization Frequently Asked Questions,
available at https://www.sec.gov/investment/investment-company-reporting-modernization-faq#_ftnref5.
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As a result of this delay of the compliance date for filing reports
on Form N-PORT for smaller fund groups by nine months, smaller fund
groups will now satisfy their final filing requirements for Form N-Q by
May 1, 2020. We are therefore delaying the effective date for the
rescission of Form N- Q until May 1, 2020.\35\ Correspondingly, the
compliance dates for the amendments to the certification requirements
of Form N-CSR will be March 1, 2019, for larger fund groups, and March
1, 2020, for smaller fund groups.\36\
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\35\ Money market funds currently file reports on Form N-Q, but
upon its rescission will not have to file reports on Form N-PORT (as
money market funds currently file monthly reports on Form N-MFP).
While the Commission is extending the effective date for the
rescission of Form N-Q until May 1, 2020, money market funds that
were relying on the Commission's original August 1, 2019 rescission
date for Form N-Q do not have to file reports on Form N-Q after
August 1, 2019 despite the new rescission date of May 1, 2020.
\36\ We are also delaying the effective date for the
corresponding amendments to references to the availability of
portfolio holdings schedules in Form N-1A, N-2, and N-3 and the
amendments to remove references to Form N-Q in rule 401 of
Regulation S-T and rules 8b-33, 30a-2, 30a-3, and 30d-1 under the
Investment Company Act, to May 1, 2020, the same day the rescission
of Form N-Q will now be effective.
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E. Six-Month Nonpublic Reporting Period
In the Adopting Release, the Commission determined that having a
six-month time period where larger fund groups are required to file
reports on Form N-PORT with the Commission, but where those reports are
not disclosed publicly, will allow funds and the Commission to make
adjustments to fine-tune the technical specifications and data
validation processes.\37\ Because larger fund groups will now be
required to submit the reports on EDGAR as of March 31, 2019, those
reports for the periods ending March 31, 2019 through September 30,
2019 will be kept nonpublic to preserve the six-month period noted
above.\38\ As before, portfolio information attached as exhibits to
Form N-PORT for the first and third quarters of a fund's fiscal year
will still be made public during this period, to ensure that
information about funds' portfolio holdings continues to be publicly
available to investors and other users during the six-month period when
reports on Form N-PORT will not be made publicly available.\39\
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\37\ See Adopting Release, supra note 1, Part II.H.1.
\38\ As in the Adopting Release, here, smaller fund groups will
not be required to file reports on Form N-PORT through the EDGAR
system until after the six-month nonpublic period for larger fund
groups has elapsed. This will allow smaller fund groups to benefit
from any adjustments to fine-tune the technical specifications and
data validation processes that occurred during the six-month
nonpublic period for larger fund groups.
\39\ See Adopting Release, supra note 1, Part II.H.1.
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F. Form N-CEN
We note that our action today does not affect requirements with
respect to Form N-CEN.\40\ Because those reports will be immediately
made public upon filing and because their annual frequency of filing
and their smaller size are expected to impose fewer demands on the
EDGAR system, we have determined not to change the submission
requirements with respect to that form at this time.
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\40\ Form N-CEN [referenced in 17 CFR 274.101] under the
Investment Company Act. Accordingly, the rescission of Form N-SAR
will not be delayed by this action.
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G. Procedural and Other Matters
The Administrative Procedure Act (``APA'') generally requires an
agency to publish notice of a rulemaking in the Federal Register and
provide an opportunity for public comment.\41\ This requirement does
not apply, however, if the agency ``for good cause finds . . . that
notice and public procedure thereon are impracticable, unnecessary, or
contrary to the public interest.'' \42\ We have determined to
immediately adopt this temporary rule delaying the requirement that
funds file reports on Form N-PORT through the EDGAR system for nine
months and making the accompanying changes described above. The
Commission has determined that the range of potential technological
matters accompanying the ongoing and anticipated improvements to the
EDGAR system warrant a delay in accepting this entirely new set of
EDGAR filings, which involve complex structured data files, until after
the EDGAR upgrades that are underway are tested. This judgment is based
on the Commission's ongoing, internal assessment of the range of
potential modifications to enhance the EDGAR system's functionality,
performance, and security. Accordingly, we have concluded that
soliciting public comment on this issue would be neither necessary,
practicable, nor in the public interest.
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\41\ See 5 U.S.C. 553(b)-(c).
\42\ 5 U.S.C. 553(b)(3)(B).
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In addition, providing immediate certainty to funds is critical
because we
[[Page 58735]]
understand that funds are currently organizing their systems and
procedures to comply with the requirements and dates set forth in the
Adopting Release. Funds need to know that there will be a nine-month
delay of the requirement that they file reports on Form N-PORT through
the EDGAR system, and that as a result they will have to maintain their
systems for filing reports on Form N-Q longer than contemplated in the
Adopting Release. The Commission is concerned, for example, that absent
the certainty provided by a final rule funds may eliminate those
systems as part of the transition to Form N-PORT. Providing notice and
comment would defeat this goal of giving certainty as to funds'
obligations in light of the necessary delays stemming from the
Commission's recent cybersecurity initiatives. Under these
circumstances, notice and comment would be both impracticable and
contrary to the public interest.
For these reasons, the Commission finds that good cause exists to
dispense with notice and comment regarding the delay of the requirement
to submit reports on Form N-PORT on EDGAR and the associated changes
outlined above.\43\
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\43\ See Section 553(b)(3)(B) of the Administrative Procedure
Act (5 U.S.C. 553(b)(3)(B)) (an agency may dispense with prior
notice and comment when it finds, for good cause, that notice and
comment are ``impracticable, unnecessary, or contrary to the public
interest''). This finding also satisfies the requirements of 5
U.S.C. 808(2), allowing the amendments to become effective
notwithstanding the requirement of 5 U.S.C. 801 (if a federal agency
finds that notice and public comment are impractical, unnecessary or
contrary to the public interest, a rule shall take effect at such
time as the federal agency promulgating the rule determines). The
amendments also do not require analysis under the Regulatory
Flexibility Act. See 5 U.S.C. 604(a).
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II. Economic Analysis
A. Introduction
The Commission is sensitive to the economic effects, including the
benefits and costs and the effects on efficiency, competition, and
capital formation that will result from this temporary final rule and
from the nine-month delay of the requirement that funds submit reports
on Form N-PORT through EDGAR, the associated delay for the same period
of the rescission of Form N-Q, the delay of the semi-annual
certification requirement in Form N-CSR, the delay of the effectiveness
of certain amendments to other rules and forms, and the change in the
six-month period during which filed reports on Form N-PORT with the
Commission will be kept nonpublic.\44\
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\44\ See Parts I.C, I.D, and I.E for the specific framework of
the nine-month delay in the submission of Form N-PORT on EDGAR.
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The Commission relies on information included in reports filed by
funds to monitor trends, identify risks, and inform its regulatory
functions. Similarly, investors and other market participants rely on
funds' public filings to assist in their investment decisions and
understanding of financial markets. Form N-PORT, which requires
reporting of a fund's complete portfolio holdings on a monthly basis
with every third month available to the public, will contribute
substantially to information made available to the Commission and the
public by funds. As the Commission has previously stated,\45\ the
adoption of Form N-PORT will modernize fund reporting, improve the
ability of the Commission to fulfill its regulatory functions, and
allow investors to make more informed investment decisions.
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\45\ See Adopting Release, supra note 1, at 81870, 81872.
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The Commission has now determined to delay the requirement that
funds submit Form N-PORT through the EDGAR system by nine months to
provide time to complete the necessary adjustments to the technical
specifications and data validation processes and to complete the
necessary functionality, performance, and security enhancements. The
Commission's implementation of this delay, while facilitating changes
to the EDGAR system, will impose certain costs on market participants,
including costs associated with delayed access to structured portfolio
holdings data, costs associated with continuing to file Form N-Q, and
recordkeeping costs associated with Form N-PORT for larger fund groups.
The economic effects of the delay are discussed in more detail below.
B. Economic Baseline
The current required reporting of information by funds (e.g.,
reports on Forms N-Q, N-CSR, and N-SAR), as well as the changes in
reporting and disclosure brought by the adoption of Form N-PORT, serve
as the baseline against which the costs and benefits as well as the
impact on efficiency, competition, and capital formation are
discussed.\46\ Additionally, the baseline takes into account the fact
that some funds likely have started updating their systems and
processes to comply with the new Form N-PORT requirements adopted in
October 2016.
---------------------------------------------------------------------------
\46\ See Adopting Release, supra note 1, at 81969.
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The entities affected by the delay of the EDGAR submission
requirement for reports on Form N-PORT are generally the funds that
will report using Form N-PORT; those entities that currently report
using Form N-Q and would have ceased doing so as of the applicable Form
N-PORT compliance date; and those entities that will rely on either
filed information, including the Commission and current and future
users of investment company portfolio information including investors,
third-party information providers, and other interested potential
users.
As of the end of 2016, approximately 95.8 million individuals owned
shares of registered investment companies, representing 55.9 million or
44.4% of U.S. households.\47\ We estimate that, as of the end of 2016,
there were 17,072 funds registered with the Commission, of which 11,548
are required to file Form N-PORT (i.e., 9,090 mutual funds (excluding
money market funds), 1,716 ETFs (including eight ETFs organized as UITs
and 1,708 ETFs that are management investment companies), and 742
closed-end funds (excluding SBICs)).\48\ Of the fund groups required to
file Form N-PORT, 68.9% of fund groups, representing 0.6% of all fund
assets, have net assets below $1 billion. We also estimate that there
are 11,540 funds that currently report on Form N-Q and will be required
to report on Form N-PORT,\49\ all of which would have ceased reporting
on Form N-Q as of the applicable Form N-PORT compliance date(s).\50\
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\47\ 2017 Investment Company FactBook (``2017 IC FactBook''), A
Review of Trends and Activities in the Investment Company Industry,
57th edition, at 2, available at https://www.ici.org/pdf/2017_factbook.pdf.
\48\ Based on data obtained from the 2017 IC FactBook and
registrants' filings with the Commission on Form N-SAR as of the end
of 2016.
\49\ 11,540 is equal to 11,548 funds that are required to file
Form N-PORT minus 8 ETFs organized as UITs that are required to file
Form N-PORT but are not required to file form N-Q. Estimates are
based on staff analysis of data obtained from Morningstar Direct, as
of December 31, 2016.
\50\ Based on data obtained from the 2017 IC FactBook and
registrants' filings with the Commission on Form N-SAR as of the end
of 2016.
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C. Economic Impacts
We are mindful of the costs and benefits of the delay in filings on
Form N-PORT, the new recordkeeping requirement, and the associated
delays in the effectiveness of certain amendments and rescissions. The
Commission notes that, where possible, it has sought to quantify the
benefits and costs, and effects on efficiency, competition, and capital
formation expected to result from the delay in the date for submitting
Form N-PORT on EDGAR, the related delay in the rescission of Form N-Q,
and the other changes made in this release. However, the Commission is
unable to quantify
[[Page 58736]]
many of the economic effects because it lacks information necessary to
provide reasonable estimates. Effects that we are unable to quantify
include the extent to which investors would be able to use the
information in Form N-PORT to make more informed investment decisions
either through direct use or through third-party service providers.
1. Economic Impacts of Delay in Form N-PORT EDGAR Submission
Requirement
The EDGAR submission requirement was designed to enhance the
Commission's ability to access efficiently and timely monthly
investment portfolio information of a large number of funds in a
structured format, and to also enhance investors' ability to make more
informed investment decisions. The delay in the requirement to submit
Form N-PORT on EDGAR will benefit reporting funds as well as funds'
current and prospective investors, because it will allow the Commission
time to make progress in the EDGAR system review and to implement and
test resulting modifications to the EDGAR system.\51\ This will allow
the large amounts of new, complex data to be submitted on EDGAR with
additional security measures in place. This, in turn, will help ensure
that the information contained in Form N-PORT, once submitted to EDGAR,
is readily accessible and usable.
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\51\ To the extent that the Commission's EDGAR review and
modernization efforts during the nine-month delay improve current
data security for nonpublic information posted on EDGAR, funds will
also benefit from efforts to strengthen the Commission's
cybersecurity risk profile going forward.
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The Commission acknowledges, however, that there are costs to a
delay in the receipt of Form N-PORT information. The delay in the EDGAR
submission requirement could potentially temporarily affect the
Commission's ability to readily incorporate Form N-PORT information
into its mission through better informed policy decisions and
oversight, more specific guidance and comments in the disclosure review
process, and more targeted examination and enforcement efforts.\52\
This impact is likely mitigated, however, because during the nine-month
delay in the EDGAR submission requirement, larger fund groups must
still prepare and maintain in their records the information that is
required to be included on Form N-PORT.\53\ Further, both smaller fund
groups and larger fund groups must also prepare and submit reports on
Form N-Q. There is overlap between the information that funds will
continue to report on Form N-Q and that required in Form N-PORT;
however, funds file Form N-Q in a non-structured data format, file the
form less frequently, and report fewer data points than on Form N-
PORT.\54\
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\52\ To the extent that larger fund groups do not prepare and
maintain their reports in XML format during the delay period, the
nine-month delay in the EDGAR submission requirement could also
temporarily negatively affect the Commission because fund reports
will not be available in a structured XML format that allows the
Commission staff to more efficiently review and analyze fund
portfolio information. See Adopting Release, supra note 1, at 81876,
81906-7.
\53\ See supra Part I.C.
\54\ As detailed in the Adopting Release, Form N-PORT requires
additional information concerning fund portfolio holdings that is
not currently required by Form N-Q. See Adopting Release, supra note
1, at 81875-76. For example, Form N-PORT requires reporting of
additional information relating to derivative investments. The form
also includes certain risk metric calculations that measure a fund's
exposure and sensitivity to changing market conditions, such as
changes in asset prices, interest rates, or credit spreads. Form N-
PORT also requires information about certain fund transactions and
activities such as securities lending, repurchase agreements, and
reverse repurchase agreements, including information regarding the
counterparties to which the fund is exposed in those transactions,
as well as in over-the-counter derivatives transactions.
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The nine-month delay of the EDGAR submission requirement will also
delay the ability of current and future users of investment company
portfolio information, including investors, third-party information
providers, and academics, to access additional publicly available data
in a structured format. This delay in the Form N-PORT submission will
defer the increase in the transparency of a fund's investment
strategies and will also postpone the increase in the ability of
investors and other potential users to more efficiently identify the
funds' risk exposures, differentiate investment companies based on
their investment strategies, and make more informed investment
decisions. Any costs of such a temporary delay are partially mitigated
by the fact that users of investment company portfolio information will
continue to have access to relevant investment company information via
the reports on Form N-Q and N-CSR for the duration of the Form N-PORT
submission delay.
To the extent that the delay in the requirement to submit Form N-
PORT on EDGAR for larger fund groups and the delay in the requirement
to file Form N-PORT for smaller fund groups change costs borne by fund
groups, these changes will come in the form of a reduction in the cost
of submitting reports on Form N-PORT on EDGAR. For larger fund groups,
there will be a cost saving associated with the nine-month delay in the
requirement to prepare the funds' systems to accommodate the XML-based
reports to the extent those fund groups choose another format to
prepare and maintain the information that is required to be included in
Form N-PORT during the delay period.\55\ For smaller fund groups, there
will be a cost saving associated with the nine-month delay in both
preparing and submitting reports on Form N-PORT on EDGAR.
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\55\ This cost saving comprises a deferral of initial costs
because larger fund groups must prepare their systems to accommodate
the XML-based reports with a nine-month delay and a reduction in
ongoing costs because larger fund groups have to accommodate the
XML-based reports for nine months less. It is possible that certain
funds have already started preparing their systems and processes to
accommodate the Form N-PORT requirements adopted in October 2016.
Any cost reductions and deferrals for those funds are likely lower.
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Based on the cost estimates in the Adopting Release for compiling
and submitting Form N-PORT on EDGAR, we believe that the cost savings
for larger fund groups associated with the delay in submitting Form N-
PORT on EDGAR and the delay in preparing the funds' systems to
accommodate the XML Form N-PORT format requirement will be minimal.
While filing with the Commission is delayed for nine months, temporary
rule 30b1-9(T) will still require larger fund groups to compile the
information that is required to be included in Form N-PORT during the
nine months that the EDGAR submission requirement is delayed and these
funds will incur the additional cost of maintaining the information
required by Form N-PORT in the funds' records in an easily accessible
place as required by the temporary final rule. We believe that the cost
savings for smaller fund groups associated with the delay in preparing
and submitting Form N-PORT on EDGAR for nine months will be likely
higher compared to the cost savings for larger fund groups. These cost
savings likely comprise a nine-month deferral of initial costs
associated with preparing the necessary systems and processes for Form
N-PORT filings and a reduction in ongoing costs associated with
preparing, reviewing, and filing reports on Form N-PORT for nine
months.\56\ Finally, for both larger and smaller funds groups, the
proposed delay will temporarily defer costs associated with the public
release of information that was previously held private.\57\
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\56\ See Adopting Release supra note 1, footnotes 1300-1304 for
details on the initial and ongoing costs associated with preparing,
reviewing, and filing reports on Form N-PORT.
\57\ Such costs include potential ``front-running,'' ``predatory
trading,'' and ``copycatting/reverse engineering of trading
strategies'' by other investors as well as the public release of
previously private and sensitive information, such as the identities
and weights of all of the individual components in custom baskets or
indexes comprising the reference instruments underlying the fund's
derivative investments, information regarding fees and financing
terms for certain derivatives contracts, information regarding the
variable financing rates for swaps that pay or receive financing
payments, and the reporting of distressed debt issued by private
companies. See Adopting Release, supra note 1, at 81977-80.
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[[Page 58737]]
2. Economic Impacts of Delay in Form N-Q Rescission
The nine-month delay in the Form N-PORT submission on EDGAR likely
imposes additional costs to funds required to file reports on Form N-Q
for an additional nine months. First, the requirement to submit Form N-
Q for an additional nine months as well as prepare and maintain the
information that is required to be included in a larger fund group's
report on Form N-PORT will impose filing costs for Form N-Q and some
duplicative preparation and recordkeeping costs on larger fund groups
that will be required to prepare and maintain information that is
included in both forms. Using estimates from the Adopting Release, we
calculate that preparing and filing Form N-Q imposes annual total cost
of $78,518,160 for all funds, or $6,804 per fund annually.\58\ However,
because substantially all of Form N-Q questions have been incorporated
into Form N-PORT, we estimate that much of the estimated burden
encompasses the cost of gathering and preparing relevant data as well
as developing or maintaining the systems and records to generate the
data that will be required by both forms. As a result, the additional
costs of preparing and filing Form N-Q during the nine-month delay will
likely be administrative in nature, and small in relation to the costs
that funds already bear for preparing and reviewing Form N-PORT.\59\
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\58\ The estimated annual cost per-fund is based upon the
following calculations: $6,804 = 21 hours/fund x $324/hour
compensation for professionals commonly used in preparation of Form
N-Q filings. ($324 = ($308 per hour for senior programmers + $340
per hour for compliance attorneys) / 2 (as half of the time will be
performed by senior programmers and half by compliance attorneys)),
as we believe these employees would commonly be responsible for
completing reports on Form N-Q. The estimated annual total cost is
based on the following calculation: $78,518,160 = $6,804 annual per
fund cost x 11,540 funds. Funds are currently required to file a
quarterly report on Form N-Q after the close of the first and third
quarters of each fiscal year. See Adopting Release, supra note 1, at
81998.
\59\ See Adopting Release, supra note 1, at page 81975.
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Second, the delay in the Form N-PORT submission requirement will
impose an additional cost on funds that must continue seeking
certification of the Form N-Q for nine more months until Form N-Q is
rescinded.\60\ As mentioned above, once Form N-Q is rescinded, the
certifying officer will be required to state that he or she has
disclosed in Form N-CSR any change in the registrant's internal control
over financial reporting that occurred during the most recent fiscal
half-year rather than the most recent quarter to fill the gap in
certification coverage that would otherwise occur once Form N-Q is
rescinded. Nevertheless, we believe any additional certification costs
arising from the delay in the Form N-Q rescission will be minimal.\61\
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\60\ On the other hand, the proposed delay in the Form N-Q
rescission will also temporarily defer for some funds any costs
associated with the rescission of Form N-Q, depending on a
particular fund's fiscal year. In particular, the rescission of Form
N-Q will eliminate certifications of the accuracy of the portfolio
schedules reported for the first and third fiscal quarters and funds
will only certify their disclosure controls and procedures and
internal control over financial reporting in Form N-CSR semi-
annually. To the extent that Form N-Q's certifications about the
accuracy of portfolio holdings improve the accuracy of the data
reported during the first and third quarters, reducing the frequency
of certifications from quarterly to semiannually could affect the
quality of the data reported. The delay in the rescission of Form N-
Q could thus delay the potential cost of reduced data quality due to
the reduction in the data certification frequency.
\61\ See Adopting Release, supra note 1, at 81975, 82005.
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3. Analysis of Effects on Efficiency, Competition, and Capital
Formation
Market participants rely on the ability of EDGAR to perform
effectively in order to provide the Commission and investors with
timely reporting. The Commission prioritizes a secure and fully
functional EDGAR for receiving information about its registrants and
providing that information to market participants. The delay in the
Form N-PORT submission requirement and the resulting delay in the Form
N-Q rescission will provide the Commission with time to make progress
in the EDGAR system review and to implement and test resulting
modifications to the EDGAR system to allow EDGAR to accept new, large,
and complex structured data disclosures made by funds effectively, with
additional security measures in place, thereby facilitating the ready
accessibility of the disclosures by investors and other market
participants.
The Commission acknowledges, however, that the delay will
temporarily prevent the Commission, investors, and other market
participants from accessing the more comprehensive and structured
portfolio information that would be made available by funds filing Form
N-PORT. The enhanced disclosures in Form N-PORT would allow the
Commission to better monitor industry trends and identify industry
outliers, provide guidance and comments to improve disclosure, identify
risks, inform policy and rulemaking, and assist the Commission in its
oversight efforts. The enhanced disclosures in Form N-PORT would also
allow investors and other market participants to more efficiently
analyze investment portfolio information, better differentiate
investment companies based on their investment strategies and other
activities, select funds based on security selection, industry focus,
level of diversification, and the use of leverage and derivatives. The
enhanced disclosures therefore would ultimately allow investors to
allocate capital across reporting funds more in line with their risk
preferences and increase the competition among funds for investor
capital. Hence, the delay in the Form N-PORT submission requirement
might temporarily negatively impact investors; the fair, orderly, and
efficient functioning of the markets; and capital formation.
Importantly, however, this temporary negative impact is mitigated by
delaying the rescission of Form N-Q until May 1, 2020 so that funds
will continue to provide some fund portfolio holdings information on
Form N-Q.
The delay may have an incremental competitive effect on larger fund
groups, which remain subject to the requirement to prepare the
information required by Form N-PORT and Form N-Q, but to retain the
former and submit the latter, for an additional nine months, while
smaller fund groups are not subject to the costs of preparing and
retaining the information required by Form N-PORT. These effects are
likely small, given the relative size of the larger fund groups to the
smaller fund groups and will only last for nine months.
D. Alternatives
As an alternative to the nine-month delay of the EDGAR submission
requirement for reports on Form N-PORT, we considered a longer or
shorter delay period. While a shorter period would have reduced the
costs to the Commission and other current and future users of
investment company portfolio information of not receiving investment
portfolio information in a more timely manner, the Commission believes
that a shorter period would be inadequate for review and testing of the
EDGAR system's ability to validate and accept Form N-PORT filings
effectively. At this time, the Commission also believes that a longer
period is not necessary and would increase the costs to the Commission
and other users of
[[Page 58738]]
investment company portfolio information.
As an alternative to the tiered EDGAR submission requirement on
Form N-PORT for larger and smaller fund groups, we considered a nine-
month delay in the Form N-PORT submission requirement only for larger
fund groups. Such a delay would not allow smaller fund groups to
benefit from the extra time to comply with the new requirements and
potentially benefit from the lessons learned by larger fund groups. As
discussed above, we are not revisiting the decision made in the
Adopting Release to maximize the potential for smaller fund groups (and
any external vendors that would be used by both larger and smaller fund
groups) to benefit from lessons learned by larger fund groups, and
therefore we are preserving a tiered requirement for the Form N-PORT
EDGAR submission process.\62\ Relatedly, similar to larger fund groups,
we considered requiring smaller fund groups to prepare and maintain
records of the information that is required to be included in Form N-
PORT during the delay. However, delaying the filing requirement for
smaller fund groups allows them to benefit from the lessons learned by
larger fund groups in preparing and filing Form N-PORT on EDGAR as
discussed in the Adopting Release.\63\
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\62\ See supra Part I.C.
\63\ See Adopting Release, supra note 1, at 81966.
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As an alternative to the delay in the rescission of Form N-Q, we
considered not delaying the rescission of Form N-Q while delaying the
N-PORT EDGAR submission requirement by nine months. Such an alternative
would decrease the information that is available to the Commission and
various market participants, such as investors, about fund portfolio
performance. Such a reduction in information availability could
adversely impact investors, market efficiency, and capital formation.
We did not revisit the decision made in the Adopting Release to
require that funds prepare the information that must be included on
Form N-PORT by June 1, 2018 for larger fund groups. The sole purpose of
the nine-month delay is to allow the Commission time to make progress
in the EDGAR system review and to implement and test resulting
modifications to the EDGAR system to allow EDGAR to accept new, large,
and complex structured data disclosures made on Form N-PORT by funds
effectively, with additional security measures in place.
III. Paperwork Reduction Act
The Commission is delaying the requirement to submit reports on
Form N-PORT on the EDGAR system by nine months for larger fund groups
from July 30, 2018 to April 30, 2019 and for smaller fund groups from
July 30, 2019 to April 30, 2020. The Commission is also adopting rule
30b1-9(T) that requires funds in larger fund groups to maintain in
their records the information required in Form N-PORT during that nine-
month delay. In addition, the Commission is delaying the rescission of
current Form N-Q and delaying the effectiveness of certain amendments
to other rules and forms. We do not believe that any of these changes
will make any substantive modifications to any existing collection of
information requirements within the meaning of the Paperwork Reduction
Act of 1995 (``PRA'').\64\
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\64\ 44 U.S.C. 3501 through 3521.
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A. Form N-PORT
Rule 30b1-9(T) will require larger fund groups, during the nine-
month delay, to satisfy their reporting obligation by maintaining in
their records the information required to be included in Form N-PORT
instead of submitting the information via EDGAR. We believe that the
burden associated with preserving the information required by Form N-
PORT in the fund's records in an easily accessible place is similar to
the burden associated with submitting the prepared report on EDGAR.
Moreover,we believe that some of the burden for smaller fund groups
associated with filing Form N-PORT will be deferred for nine months,
but because many of the burdens associated with preparing Form N-PORT
will be incurred by funds before then, we believe that there will be no
substantive modification to the existing collection of information for
Form N-PORT. As a result, the Commission believes that the current PRA
burden estimates for the existing collection of information
requirements remain appropriate.\65\
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\65\ ``Form N-PORT Under the Investment Company Act, Monthly
Portfolio Investments Report'' (OMB Control No. 3235-0730).
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B. Rescission of Form N-Q
As discussed in the Adopting Release, in connection with our
adoption of Form N-PORT, we determined to rescind Form N-Q effective
August 1, 2019 in order to eliminate unnecessarily duplicative
reporting requirements once smaller funds began reporting on Form N-
PORT.\66\ The rescission of Form N-Q will affect all management
investment companies required to file reports on the form. Because
larger fund groups that are subject to rule 30b1-9(T) will be required
to file public reports on Form N-Q at the time they prepare and
preserve the information required by Form N-PORT, these requirements
include certain requirements that are duplicative, though they will not
involve duplicative public reporting requirements. Because we are
delaying the effective date of the rescission of Form N-Q by nine
months to May 1, 2020, the burden reduction we estimated will be
realized nine months later than contemplated by the Adopting Release.
As a result, the Commission believes that the current PRA burden
estimates for the existing collection of information requirements
remain appropriate.\67\
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\66\ Adopting Release, supra note 1, at 81998.
\67\ ``Form N-Q--Quarterly Schedule of Portfolio Holdings of
Registered Management Investment Company'' (OMB Control No. 3235-
0578).
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C. Registration Statement Forms
We are delaying the effective date of technical and conforming
changes to Forms N-1A, N-2, and N-3 referring to the availability of
portfolio holdings schedules to May 1, 2020, the same day the
rescission of Form N-Q will now be effective.
In the Adopting Release, we did not estimate a change to burden
hours or the external costs related to the technical and conforming
amendments related to the availability of portfolio holdings schedules.
Therefore, we do not believe that there is a change to burden hours or
the external costs resulting from the delay of the effective date of
these amendments. Accordingly, the Commission believes that the current
PRA burden estimates for the existing collection of information
requirements remain appropriate.\68\
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\68\ ``Form N-1A under the Securities Act of 1933 and under the
Investment Company Act of 1940, Registration Statement of Open-End
Management Investment Companies'' (OMB Control No. 3235-0307);
``Form N-2 under the Investment Company Act of 1940 and Securities
Act of 1933, Registration Statement of Closed-End Management
Investment Companies'' (OMB Control No. 3235-0026); and ``Form N-3
Under the Investment Company Act of 1940, Registration Statement of
Separate Accounts Organized as Management Investment Companies''
(OMB Control No. 3235-0316).
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D. Amendments to Form N-CSR
As discussed in the Adopting Release, in connection with the
rescission of Form N-Q, we also adopted amendments to Form N-CSR, the
reporting form used by management companies to file certified
shareholder reports under the Investment Company Act and the Exchange
Act.\69\
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\69\ Adopting Release, supra note 1, at 82004. Compliance with
the certification requirements will be mandatory, and responses are
not kept confidential.
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[[Page 58739]]
In the Adopting Release, we estimated that the amendments to the
certification requirements of Form N-CSR would not change the annual
hour burden or external costs associated with Form N-CSR.\70\
Therefore, we do not believe that there is a change to burden hours or
the external costs resulting from the delay of the effective date of
these amendments. Accordingly, the Commission believes that the current
PRA burden estimates for the existing collection of information
requirements remain appropriate.\71\
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\70\ Id. at 82005.
\71\ ``Form N-CSR under the Securities Exchange Act of 1934 and
under the Investment Company Act of 1940, Certified Shareholder
Report of Registered Management Investment Companies'' (OMB Control
No. 3235-0570).
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IV. Statutory Authority
We are adopting the rules contained in this document under the
authority set forth in the Securities Act [15 U.S.C. 77a et seq.], the
Exchange Act, particularly sections 10, 13, 15, 23, and 35A thereof [15
U.S.C. 78a et seq.], the Investment Company Act, particularly sections
8, 30, 31, and 38 thereof [15 U.S.C. 80a et seq.], and 44 U.S.C. 3506.
List of Subjects
17 CFR Part 232
Administrative practice and procedure, Reporting and recordkeeping
requirements, Securities.
17 CFR Part 239
Reporting and recordkeeping requirements, Securities.
17 CFR Part 249
Reporting and recordkeeping requirements, Securities.
17 CFR Parts 270 and 274
Investment companies, Reporting and recordkeeping requirements,
Securities.
For reasons set forth in the preamble, title 17, chapter II of the
Code of Federal Regulations is amended as follows:
PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940
0
1. The authority citation for part 270 continues to read, in part, as
follows:
Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *
0
2. Section 270.30b1-9(T) is added to read as follows:
Sec. 270.30b1-9(T) Temporary rule regarding monthly report.
(a) Until April 1, 2019, each registered management investment
company subject to Sec. 270.30b1-9 of this chapter must satisfy its
reporting obligation under that section by maintaining in its records
the information that is required to be included in Form N-PORT (Sec.
274.150 of this chapter).
(b) The information maintained in the registered management
investment company's records under paragraph (a) of this section shall
be treated as a record under section 31(a)(1) of the Act [15 U.S.C.
80a-30(a)(1)] and Sec. 270.31a-1(b) of this chapter subject to the
requirements of Sec. 270.31a-2(a)(2) of this chapter.
(c) This section will expire and no longer be effective on March
31, 2026.
By the Commission.
Dated: December 8, 2017.
Brent J. Fields,
Secretary.
[FR Doc. 2017-26922 Filed 12-13-17; 8:45 am]
BILLING CODE 8011-01-P
