Amendments to the Timing Requirements for Filing Reports on Form N-Port, 7980-7988 [2019-03958]
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Federal Register / Vol. 84, No. 44 / Wednesday, March 6, 2019 / Rules and Regulations
about file formats, please contact the
Bureau at Collect_Support@cfpb.gov.
V. Paperwork Reduction Act
C. Compliance Assistance
The Bureau has made a number of
compliance resources available to assist
issuers in using the Collect website,
including a user guide, a quick reference
guide, frequently asked questions, and a
recorded webinar.8 These resources will
be available on the Bureau’s website at
https://www.consumerfinance.gov/dataresearch/prepaid-accounts/. For
technical assistance, issuers can also
contact the Bureau at Collect_Support@
cfpb.gov.
III. Legal Authority
The Bureau is issuing this procedural
rule pursuant to its authority under
section 1022(b)(1) of the Dodd-Frank
Act, which authorizes the Bureau to
prescribe rules as may be necessary or
appropriate to enable the Bureau to
administer and carry out the purposes
and objectives of Federal consumer
financial law.9 The Bureau is also
issuing this procedural rule pursuant to
section 904 of the Electronic Fund
Transfer Act (EFTA), which authorizes
the Bureau to prescribe regulations
necessary to carry out the purposes of
EFTA.10
IV. Regulatory Requirements
The Bureau has concluded that these
technical specifications constitute a rule
of agency organization, procedure, or
practice exempt from the notice and
comment rulemaking requirements
under the Administrative Procedure Act
(APA), pursuant to 5 U.S.C. 553(b).
Because the procedural rule relates
solely to agency procedure and practice,
it is not substantive, and therefore is not
subject to the 30-day delayed effective
date for substantive rules under section
553(d) of the APA. Because no notice of
proposed rulemaking is required, the
Regulatory Flexibility Act does not
require an initial or final regulatory
flexibility analysis.
8 The Bureau has previously issued various
implementation tools regarding the Prepaid
Accounts Rule, including a small entity compliance
guide, executive summary of the rule, summaries of
key changes for payroll card accounts and
government benefit accounts, a prepaid account
coverage chart, a summary of the rule’s effective
date provisions, and a guide to preparing the short
form disclosure, among others. These materials can
be found on the Bureau’s guidance and
implementation website at https://
www.consumerfinance.gov/policy-compliance/
guidance/prepaid-rule/.
9 12 U.S.C. 5512(b)(1).
10 15 U.S.C. 1693b.
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Under the Paperwork Reduction Act
of 1995 (PRA),11 Federal agencies are
generally required to seek Office of
Management and Budget (OMB)
approval for information collection
requirements prior to implementation.
The collections of information related to
the account agreement submission
requirements in § 1005.19 were
previously submitted to OMB in
accordance with the PRA under OMB
Control Number 3170–0014. Under the
PRA, the Bureau may not conduct or
sponsor and, notwithstanding any other
provision of law, a person is not
required to respond to an information
collection unless the information
collection displays a valid control
number assigned by OMB. The Bureau
has determined that these technical
specifications do not introduce any new
or revised collections of information;
therefore, the Bureau does not intend to
submit a separate request to OMB
regarding these technical specifications.
Dated: February 22, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial
Protection.
[FR Doc. 2019–03852 Filed 3–5–19; 8:45 am]
BILLING CODE 4810–AM–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 270 and 274
[Release No. IC–33384; File No. S7–02–19]
RIN 3235–AL42
Amendments to the Timing
Requirements for Filing Reports on
Form N–Port
Securities and Exchange
Commission.
ACTION: Interim final rule.
AGENCY:
The Securities and Exchange
Commission (the ‘‘Commission’’) is
adopting an interim final rule that will
require reports on Form N–PORT for
each month in a fiscal quarter to be filed
with the Commission not later than 60
days after the end of that fiscal quarter
(as opposed to filing each monthly
report no later than 30 days after the
end of each month). The monthly report
on Form N–PORT for the third month of
the quarter (the ‘‘quarter-end report’’)
will continue to become publicly
available (i.e., all portions of the
quarter-end report, with the exception
of the items identified in General
SUMMARY:
11 44
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Instruction F of Form N–PORT, will be
made public upon filing). The monthly
reports on Form N–PORT for the first
and second months of the fiscal quarter
will remain non-public. We are also
amending our regulations and Form N–
PORT to require that funds, no later
than 30 days after the end of each
month, maintain in their records the
information that is required to be
included in Form N–PORT. Registrants
will promptly make such records
available to the Commission upon
request. Finally, we are amending Form
N–LIQUID to provide for a voluntary
explanatory notes section. Importantly,
these amendments in no way affect the
amount or timing of the information that
will be made available to the public.
DATES: Effective March 6, 2019. The
applicable compliance dates are
discussed in the SUPPLEMENTARY
INFORMATION section of this Interim Final
Rule.
FOR FURTHER INFORMATION CONTACT:
Jacob D. Krawitz, Branch Chief, or Brian
McLaughlin Johnson, Assistant Director,
at (202) 551–6792, Rulemaking Office,
Division of Investment Management,
Securities and Exchange Commission,
100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The
Commission is amending rule 30b1–9
[17 CFR 270.30b1–9] under the
Investment Company Act [15 U.S.C.
80a–1 et seq.] and Forms N–PORT
[referenced in 17 CFR 274.150] and N–
LIQUID [referenced in 17 CFR 274.223]
under the Investment Company Act.
I. Discussion
In connection with the Commission’s
ongoing evaluation of its collection of
sensitive and non-public data, and in
light of the frequency, volume, and
complexity, as well as the potentially
sensitive and non-public nature, of
much of the data collected on Form N–
PORT,1 the Commission is modifying
the timing requirements for filing
monthly reports on Form N–PORT. We
are amending rule 30b1–9 and Form N–
PORT to require funds to file a report on
Form N–PORT for each month in the
fund’s fiscal quarter not later than 60
days after the end of that fiscal quarter.
In addition, we are amending rule 30b1–
9 and Form N–PORT to require funds,
no later than 30 days after the end of
each month, to maintain in their records
1 See Statement on Cybersecurity (September 20,
2017), available at https://www.sec.gov/news/
public-statement/statement-clayton-2017-09-20; see
also Testimony before the Financial Services and
General Government Subcommittee of the Senate
Committee on Appropriations (June 5, 2018),
available at https://www.sec.gov/news/testimony/
testimony-financial-services-and-generalgovernment-subcommittee-senate-committee.
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the information that is required to be
included in Form N–PORT.2
Importantly, these amendments in no
way affect the amount or timing of the
information that will be made available
to the public.
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.3 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.4 Form N–
PORT is a portfolio holdings reporting
form that will be filed by all registered
management investment companies,
other than money market funds and
small business investment companies
(‘‘SBICs’’), and by unit investment trusts
that operate as exchange-traded funds
(collectively, ‘‘funds’’).5 Under the rule
the Commission adopted in 2016, after
the compliance date, funds must file
reports on Form N–PORT each month,
no later than 30 days after month-end,
using the Commission’s EDGAR
system.6 The compliance date for rule
30b1–9 was June 1, 2018 for larger fund
groups and June 1, 2019 for smaller
fund groups.7
In 2017, the Commission’s Chairman
initiated an assessment of the
Commission’s internal cybersecurity
risk profile and its approach to
cybersecurity from a regulatory and
2 We also are amending Form N–LIQUID to
provide for a voluntary explanatory notes section.
See amended Form N–LIQUID.
3 Investment Company Reporting Modernization,
Investment Company Act Release No. 32314 (Oct.
13, 2016) [81 FR 81870 (Nov. 18, 2016)] (‘‘Adopting
Release’’).
4 Reports on Form N–PORT are required to be
filed in an extensible markup language (‘‘XML’’)
structured data format.
5 See Form N–PORT.
6 See rule 30b1-9; see General Instruction C
(Filing of Reports) of Form N–PORT; see also
Adopting Release, supra footnote 3, at section
II.H.1.
7 When we adopted Form N–PORT, we provided
for a tiered set of compliance dates based 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. 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. See Adopting Release,
supra footnote 3, at section II.H.1.
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oversight perspective.8 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 the
Commission’s EDGAR system as well as
the non-public information collected
and held by the Commission.9
On December 8, 2017, while these
efforts were ongoing, the Commission
determined to delay by nine months the
requirement that funds file reports on
Form N–PORT through the EDGAR
system.10 The Commission also adopted
temporary rule 30b1–9(T), which, until
April 1, 2019, requires larger fund
groups to satisfy their reporting
obligations by maintaining in their
records the information required to be
included in Form N–PORT.11 After such
time, larger fund groups must file
reports on Form N–PORT through the
EDGAR system.12 Smaller fund groups
must begin to file reports on Form N–
PORT through the EDGAR system by
April 30, 2020.13
B. Commission’s Determination To
Modify the Timing Requirements for
Filing Reports on Form N–PORT
The Commission receives, stores, and
transmits a substantial amount of data,
including sensitive and non-public data.
There are certain types of sensitive data
that the Commission obtains from
market participants in order to fulfill its
mission.14 The collection, storage,
analysis, availability, and protection of
data have become fundamental to the
protection of investors, the orderly
function and performance of our capital
markets, market participants, and the
Commission.15
In that regard, maintaining effective
cybersecurity practices requires an
ongoing evaluation of the data an
organization obtains and protects. When
determining when and how to collect
data, the Commission evaluates its
approach in light of the importance to
its mission of each type of data we
8 See
Statement on Cybersecurity, supra footnote
1.
9 See Update on Review of 2016 Cyber Intrusion
Involving EDGAR System (Oct. 2, 2017), available
at https://www.sec.gov/news/press-release/2017186; see also Investment Company Reporting
Modernization, Investment Company Act Release
No. 32936 (Dec. 8, 2017) [82 FR 58731 (Dec. 14,
2017)] (‘‘Temporary Final Rule Release’’), at note 17
and accompanying text.
10 See id.
11 See rule 30b1–9(T); see also Temporary Final
Rule Release, supra footnote 9.
12 See Temporary Final Rule Release, supra
footnote 9.
13 See id.
14 See Statement on Cybersecurity, supra footnote
1.
15 See id.
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7981
receive, particularly in the case of
sensitive, non-public information.16
The Commission periodically
assesses, as part of its cybersecurity
efforts, whether alternatives exist that
would allow the Commission to fulfill
its mission while reducing the
sensitivity of data we collect.17 For
example, in 2018, after concluding that
the Commission would be able to
achieve its regulatory objectives without
taking in certain sensitive personally
identifiable information, the
Commission eliminated the requirement
for filers of certain forms to provide us
with their social security numbers,
foreign identity numbers or date or
place of birth.18 We have also reduced
the market sensitivity of the non-public
data we collect by obtaining it on a
delayed basis, when appropriate.19
For many years, the Commission has
collected registered fund portfolio data
on a quarterly basis on Forms N–Q and
N–CSR, both of which are public
filings.20 We acknowledged that this
data was sensitive, and addressed that
sensitivity by requiring reports on Form
N–Q to be filed no later than 60 days
after the end of the first and third
quarters of a fund’s fiscal year, and
Form N–CSR no later than 70 days after
the end of the second and fourth
quarters.21 We also made this data
public upon filing.
16 See
id.
id.
18 See Amendments to Forms and Schedules To
Remove Provision of Certain Personally Identifiable
Information, Investment Company Act Release No.
33077 (Apr. 24, 2018) [83 FR 22190 (May 14, 2018)].
19 See Statement on Cybersecurity, supra footnote
1. For example, large private equity advisers and
smaller private fund advisers file reports on Form
PF 120 days from the end of their fiscal years, while
large hedge fund advisers file reports 60 days from
the end of each fiscal quarter. See Reporting by
Investment Advisers to Private Funds and Certain
Commodity Pool Operators and Commodity
Trading Advisors on Form PF, at section II.B.,
Investment Advisers Act Release No. 3308 (Oct. 31,
2011) [76 FR 71228 (Nov. 16, 2011)] (‘‘Form PF
Adopting Release’’) (noting in connection with the
non-public nature of Form PF data that the
Commission had extended timelines for advisers’
filing fund information compared to the proposal
and that, as a result, filings will contain less
current, and therefore less sensitive, data).
20 See Adopting Release, supra footnote 3, at note
27.
21 See 17 CFR 270.30b1–5 (rule 30b1–5)
(requiring management companies, other than
SBICs, to file reports on Form N–Q no more than
60 days after the close of the first and third quarters
of each fiscal year); 17 CFR 270.30b2–1 (rule 30b2–1)
(requiring management companies to file reports on
Form N–CSR no later than 10 days after the
transmission to stockholders of any report required
to be transmitted to stockholders under rule 30e–
1). See also rules 17 CFR 270.30e–1 (rule 30e–1)
and 17 CFR 270.30e–2 (rule 30e–2) (requiring
management companies and certain UITs to
transmit to stockholders semi-annual reports
containing, among other things, the fund’s portfolio
17 See
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In adopting Form N–PORT in 2016,
the Commission changed the frequency
of reporting and filing fund portfolio
holdings information to monthly, with
the first two months of a fiscal quarter
filed confidentially with the
Commission.22 In making this 2016
change, the Commission acknowledged
tradeoffs raised by commenters between
(i) data sensitivity and data security
concerns with this increased frequency
of reporting of confidential information,
and (ii) countervailing concerns that
quarterly portfolio reports can quickly
become stale due to the turnover of
portfolio securities and fluctuations in
the values of portfolio investments.23
We also noted that requiring funds to
file confidential reports more than 30
days after month-end would provide
less timely data to the Commission,
reducing its utility to the Commission.24
We stated at that time that the filing of
monthly data—which our amendments
preserve—would triple the amount of
data reported to the Commission in a
given year, and that this should enhance
the ability of staff to perform analyses of
funds in the course of monitoring for
industry trends, or identifying issues for
examination or inquiry.25
At the time, and with the information
then available about cybersecurity risks
and related tradeoffs on data security,
we determined that more frequent
reporting was warranted.26 But we also
observed that Commission staff would
carefully evaluate the data security
protocols that will apply to non-public
data reported on Form N–PORT in light
of the specific recommendations and
concerns raised by commenters.27 We
also directed the staff, in advance of the
form’s compliance date, to review the
controls and systems in place for the use
and handling of non-public information
reported on Form N–PORT.28 As
discussed above, in 2017, the
Commission postponed the initial
reporting of Form N–PORT on EDGAR
by nine months.29
The evaluation of the data security
protocols relating to Form N–PORT, in
addition to our ongoing assessment of
schedules, no more than 60 days after the close of
the second and fourth quarters of each fiscal year).
These reports include portfolio holdings
information as required by Regulation S–X. See 17
CFR 210.12–12, et seq. (rule 12–12 of Regulation
S–X).
22 See infra footnote 32.
23 See Adopting Release, supra footnote 3, at
section II.A.3.
24 See id., at section II.A.4.
25 See id., at section II.A.3.
26 Id.
27 Id.
28 Id.
29 See Temporary Final Rule Release, supra
footnote 9.
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our internal cybersecurity risk profile,
have led us to reevaluate whether, in
this particular case, we can
meaningfully reduce the sensitivity of
the data we will maintain while
continuing to achieve our regulatory
objectives. This re-evaluation has led us
to determine that allowing monthly data
on Form N–PORT to be reported to the
Commission on a more delayed basis—
while in no way reducing the amount of
data that we ultimately receive, and also
preserving the staff’s ability to require
production of the data on a more timely
basis upon request—will allow the
Commission to fulfill its mission, while
meaningfully reducing the potential
cybersecurity risks arising from the
collection and maintenance of sensitive
non-public data on EDGAR.30 We are
therefore amending rule 30b1–9 and
Form N–PORT to require funds to file
reports on Form N–PORT for each
month in a fiscal quarter not later than
60 days after the end of that quarter.31
The reports on Form N–PORT for the
first two months of the quarterly filing
period will continue to be non-public
and the quarter-end report (i.e., the last
month of the quarter) will become
publicly available immediately upon
filing, with the exception of the items
identified in General Instruction F of
Form N–PORT, which will continue to
remain non-public.32
As is the case under temporary rule
30b1–9(T), in order to continue to
provide for Commission access to the
information required to be included in
Form N–PORT on a more timely basis,
we are also amending rule 30b1–9 to
require funds to maintain in their
records the information that is required
to be included on Form N–PORT not
later than 30 days after the end of each
month.33 Consistent with current record
retention requirements for registered
30 The Commission has not considered any other
changes to Form N–PORT, rules, other forms, and
amendments besides those discussed in this release.
Additionally, if any of the provisions of these
amendments, or the application thereof to any
person or circumstance, is held to be invalid, such
invalidity shall not affect other provisions or
application of such provisions to other persons or
circumstances that can be given effect without the
invalid provision or application.
31 See amended rule 30b1–9; see also conforming
amendments to 17 CFR 274.150(a) and amended
General Instruction A of Form N–PORT. Funds
may, at their discretion, file reports on Form N–
PORT prior to the 60-day deadline.
32 Certain data fields on the quarter-end report on
Form N–PORT, such as Highly Liquid Investment
Minimum (Item B.7), derivatives transactions (Item
B.8), country of risk and economic exposure (Item
C.5.b), delta (Items C.9.f.v, C.11.c.vii, or C.11.g.iv),
liquidity classification for portfolio investments
(Item C.7), miscellaneous securities (Part D), or
explanatory notes related to any of those topics
(Part E) will continue to be masked from the public.
See General Instruction F of Form N–PORT.
33 See amended rule 30b1–9.
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investment companies, such
information must be treated as a record
under 15 U.S.C. 80a–30(a)(1) (section
31(a)(1) of the Act) and 17 CFR 270.31a–
1(b) (rule 31a–1(b)) thereunder, subject
to the requirements of 17 CFR 270.31a–
2(a)(2) (rule 31a–2(a)(2)).34 While
neither amended rule 30b1–9 nor rule
31a–2 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 for each month at
quarter end.
In reassessing whether, in this
particular case, we can meaningfully
reduce the sensitivity of the data we
will maintain while continuing to
achieve our regulatory objectives, we
considered that these changes only
relate to when funds must file reports
on Form N–PORT with the Commission.
The data content of what funds must
report, either publicly or non-publicly,
will not change. In addition, neither the
content nor the timing requirements for
publicly available information on Form
N–PORT will change. Therefore, the
amendments will have no effect on the
ability of investors and other market
participants to use this information to
help them make more informed
investment decisions. Rather, they will
only modify the timing of the
Commission’s receipt of information for
internal purposes. Additionally,
requiring funds to maintain the Form
N–PORT data in their records 30 days
after the end of each month will ensure
that the Commission can receive more
timely information, when necessary.
This modification will reduce the
Commission’s cyber risk profile in
several ways. First, extending the fiscal
quarter-end filing deadline from 30 to
60 days allows the quarter-end report on
Form N–PORT to be made public
immediately upon filing, with the
exception of the non-public fields
described above.35 Without this change,
the Commission would need to keep
this data non-public for at least a month
after filing. This change therefore
significantly reduces the volume of nonpublic data maintained in our systems,
with no effect on the information
investors and other market participants
receive or the timing of such receipt.36
Second, delaying the filing deadline for
34 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).
35 See supra footnote 32.
36 See id. While certain of these items, such as
‘‘miscellaneous securities’’ (Part D of the Form),
may contain sensitive, non-public data, this data’s
sensitivity is also reduced by the additional delay.
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the fund’s non-public first and second
month reports for each fiscal quarter on
Form N–PORT, to a time when the
quarter-end report will be submitted
and made public, significantly reduces
the sensitivity of the non-public data.
Registrants can take steps to reduce
the risk of any inadvertent disclosure of
non-public Form N–PORT data filed
through EDGAR by, for example, filing
the quarter-end report (which is largely
public data) on a separate day from the
first two months of the fiscal quarter to
reduce the risk of the fund incorrectly
identifying a non-public filing as
public.37 In addition, we are modifying
the filing schema for Form N–PORT to
require registrants to affirm whether the
data in the filing is non-public (for
months 1 and 2) or public (month 3).
For example, if a registrant affirms in
the filing that the data is non-public, but
attempts to file report type NPORT–P
(which will be made public upon filing),
such a filing will not be accepted by
EDGAR.38 We believe that such a
change will help ensure that filers do
not inadvertently make the wrong
month’s data public.
Importantly, we will still receive the
monthly Form N–PORT data necessary
to assist us in our role as primary
regulator of investment companies and
to better fulfill our mission of protecting
investors; maintaining fair, orderly, and
efficient markets; and facilitating capital
formation.39 Additionally, the staff will
continue to monitor and solicit feedback
on the data received and the use made
(or expected to be made) of such data in
furtherance of the Commission’s
statutory mission, as well as
cybersecurity considerations and other
37 As
further detailed in the Form N–PORT filing
requirements in the EDGAR Filing Manual, quarterend filings will be made by filing two separate
reports on the NPORT–NP form type (for the first
two months of the fund’s fiscal quarter) and one
report on NPORT–P form type (for the third month
of the fund’s fiscal quarter). See EDGAR Filer
Manual, v. II, available at https://www.sec.gov/info/
edgar/edgarfm-vol2-v49.pdf.
38 See id.
39 While we acknowledge that requiring funds to
file reports more than 30 days after month end will
result in less timely data being submitted to the
Commission, which may reduce the utility of
portfolio information to the Commission, we still
believe that it is necessary for the Commission to
receive monthly data points from funds, albeit with
a longer delay. See Adopting Release, supra
footnote 3, at section II.A.3. As we noted in the
Adopting Release, such data will continue to
enhance the ability of staff to perform analyses of
funds in the course of monitoring for industry
trends, or identifying issues for examination or
inquiry. Id. Moreover, our experience with large
hedge fund adviser reporting on Form PF has
shown us that quarterly reporting of monthly data,
with a 60-day delay in its submission, is useful in
providing regulators with data to identify emerging
trends and risks. See Form PF Adopting Release,
supra footnote 19, at section II.B.1.
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matters deemed relevant by the staff. In
this regard, the staff will inform the
Commission, within one year from the
date hereof, what steps, if any, the staff
recommends in light of this monitoring,
including but not limited to whether the
filing time frames should be amended.
The Commission also will continue to
receive reports on Form N–LIQUID,
which provides the Commission with
more timely information on certain
liquidity events at a fund.40 In addition,
we understand from staff outreach that
certain funds would like the
opportunity, when appropriate, to
provide more information related to
their filings on Form N–LIQUID. For
example, when filing reports on Form
N–LIQUID, some funds have requested
the ability to include additional
narrative information in their reports
that relate to the circumstances
surrounding the liquidity event.
Therefore, in order to allow funds the
opportunity to communicate this
information voluntarily, we are
amending Form N–LIQUID to provide
for a voluntary explanatory notes
section.41
As noted above, consistent with the
Commission’s examination authority,
upon request, funds will promptly
provide data that is required by Form
N–PORT and is maintained in their
records within 30 days after the end of
each month.42 The Commission’s ability
to collect information in a timely
fashion through its examination
authority, and evaluate such
information for compliance with the
federal securities laws, is essential to
our mission of protecting investors and
our securities markets.43 Indeed, the
prompt production of records to the
Commission is central to our mission of
protecting investors, and is imperative
to an effective and efficient examination
program.44 Accordingly, nothing in this
40 See Investment Company Liquidity Risk
Management Program, Investment Company Act
Release No. 32315 (Oct. 13, 2016) [81 FR 82142
(Nov. 18, 2016)].
41 See Part E of Amended Form N–LIQUID.
42 See amended rule 30b1–9; see also supra
footnotes 33–34 and accompanying text.
43 See, e.g., 15 U.S.C. 80a–30(b) (section 31(b) of
the Investment Company Act) (providing the
Commission with examination authority); 15 U.S.C.
80b–4 (section 204 of the Investment Advisers Act)
(same); see also rule 31a–1 (Commission books and
records rules); rule 31a–2 (same); 17 CFR 275.204–
2 (rule 204–2 under the Investment Advisers Act)
(same).
44 See, e.g., Electronic Recordkeeping by
Investment Companies and Investment Advisers,
Investment Advisers Act Release No. 1945 (May 24,
2001) [66 FR 29224 (May 30, 2001)] (explaining that
the ‘‘continuing accessibility and integrity of fund
and adviser records are critical to the fulfillment of
our oversight responsibilities,’’ and noting the
Commission’s expectation that a fund or adviser
would be permitted to delay furnishing
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7983
release should be construed as diluting
our commitment to enforcing the
regulatory requirements relating to
books and records and their production
to us.
We request comment on our
amendments to rule 30b1–9 and Form
N–PORT.
• Should we amend rule 30b1–9 and
Form N–PORT to require each monthly
report to be filed with the Commission
quarterly, rather than monthly? If not,
why not?
• Should we amend rule 30b1–9 to
require funds no later than 30 days after
the end of each month, to maintain in
their records the information that is
required to be included in Form N–
PORT? Should we extend the 30-day
after month end deadline for retaining
monthly data? If so, why and how long
of a period would be appropriate? Are
there any operational difficulties with
maintaining such data in a fund’s
records?
• Should we require funds to
maintain such data in an XML format?
• Should we extend the filing
deadline for Form N–PORT until sixty
days after quarter end? Does the
extension sufficiently reduce the
sensitivity of the data contained in Form
N–PORT? If not, why not and how long
of a period would be appropriate? Are
there any operational difficulties with
filing three separate reports on Form N–
PORT sixty days after the end of the
fiscal quarter?
• Should we amend Form N–LIQUID
to provide for a voluntary explanatory
notes section?
C. Compliance Dates
As discussed above, the current
compliance dates for Form N–PORT
will not change. Funds in larger fund
groups that were subject to the June 1,
2018 compliance date must continue 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.45 Additionally,
after the April 1, 2019 expiration of the
temporary final rule’s retention
requirement, funds in larger fund
groups will be required to begin
submitting their first reports on EDGAR
(60 days after the end of their fiscal
quarter) and will continue, 30 days after
month-end, to maintain in their records
the information that is required to be
electronically stored records for more than 24 hours
only in ‘‘unusual circumstances.’’).
45 See rule 30b1–9(T)(a); see also Temporary Final
Rule Release, supra footnote 9.
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included in Form N–PORT.46 Below is
a chart that describes the current
compliance dates for reports on Form
N–PORT.
Compliance date
for filing reports
on EDGAR
Form N–PORT
Large Fund Groups .......
Smaller Fund Groups ....
April 1, 2019.
April 1, 2020.
Finally, the first six months of reports
on Form N–PORT (i.e., reports filed
with the Commission with monthly data
from the quarters ending March 31,
2019 through August 31, 2019) will
continue to be kept non-public in order
to allow funds and the Commission to
make adjustments to fine-tune the
technical specifications and data
validation processes.47 As before,
portfolio information attached as
exhibits to Form N–PORT for the first
and third quarters of a fund’s fiscal year
(Part F of Form N–PORT) will still be
made public during this period, to
ensure that information about funds’
portfolio holdings continues to be
publicly available to investors and
market participants during the period
when reports on Form N–PORT will not
be made publicly available.48
However, given the timing
considerations relating to this action,
the Commission understands that some
funds in larger fund groups, such as
those with fiscal quarters ending in
March or April, may not currently be
prepared to file all three months of
Form N–PORT reports at the end of
their next fiscal quarter.49 In order to
give these larger fund groups adequate
time to prepare their reports, the
Commission is exempting funds in
larger fund groups with fiscal quarters
ending in March from the requirement
to file their reports on Form N–PORT for
the first two months of data with the
Commission (January and February),
and funds with fiscal quarters ending in
April from the requirement to file the
report for the first month of data with
the Commission (February).50 For
example, a fund in a larger fund group
with its fiscal quarter ending in April
2019 will only be required to file reports
on Form N–PORT for the fund’s second
and third month (March and April
2019), which must be filed with the
Commission 60 days from quarterend.51 At the next fiscal quarter end
(July 2019), the fund will file reports on
Form N–PORT for each month of the
quarter (May, June, and July), 60 days
from the end of the quarter. Again, all
such reports, with the exception of the
month 3 portfolio holdings attachment
(Part F of Form N–PORT), will not be
made public. Below is a chart that
describes the filing dates for larger
funds groups’ first reports on Form N–
PORT.
Fiscal quarter end
First report on Form N–PORT must be filed
on EDGAR by
Required monthly data
March 31, 2019 ...................................................................
April 30, 2019 .....................................................................
May 31, 2019 ......................................................................
May 30, 2019 .....................................................................
July 1, 2019 52 ...................................................................
July 30, 2019 .....................................................................
March 2019.
March, April 2019.
March, April, May 2019.
We request comment on the
compliance date for our amendments to
Form N–PORT and rule 30b1–9.
• Do the current compliance dates
provide adequate time for funds to
prepare their systems for filing reports
on Form N–PORT? If not, why not, and
how much more time is needed?
• Should we provide relief to funds
with fiscal quarters ending in March
and April to allow them only to file
reports for the third month of their
quarter end in 2019? Should we extend
this relief to funds with other quarterends? Will funds with other quarter
ends have any operational difficulties
with modifying their systems to file
each monthly report on Form N–PORT
46 As discussed above, the temporary final rule
requires larger fund groups to satisfy their reporting
obligations by maintaining in their records the
information required to be included in Form N–
PORT. See amended rule 30b1–9(T). Amended rule
30b1–9, among other things, makes such a data
retention requirement permanent for all funds,
subject to rule 31a–2(a)(2). See supra footnotes 33–
34 and accompanying text. Additionally, smaller
fund groups will continue to be required to submit
their first reports on EDGAR by April 30, 2020.
Moreover, after April 1, 2020, smaller fund groups
will also be required to comply with amended rule
30b1–9’s data retention requirement.
47 See Adopting Release, supra footnote 1, section
II.H.1.
48 See id.
49 Neither temporary rule 30b1–9(T) nor amended
rule 30b1–9 requires funds to maintain Form N–
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60 days after the end of their fiscal
quarter?
D. 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.53 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.’’ 54 We
have determined to immediately adopt
this modification to the filing
requirements for Form N–PORT and the
accompanying changes described above.
PORT information in their records in an XML
format. See Temporary Final Rule Release, supra
footnote 9, at note 28. Without relief, funds with
fiscal quarters ending in March or April would be
required to create XML reports on Form N–PORT
for the months that are covered by the temporary
rule which would effectively require funds to create
XML reports on Form N–PORT earlier than
anticipated. Such funds will still be required to
comply with rule 30b1–9’s data retention
requirements for the information required to be
reported on Form N–PORT. See amended rule
30b1–9.
50 For the reasons discussed above, we find that
this relief is necessary or appropriate in the public
interest and consistent with the protection of
investors and the purposes fairly intended by the
policy and provisions of the Investment Company
Act. See 15 U.S.C. 80a–6(c).
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As discussed above, based on our
recent evaluation of the data security
protocols relating to Form N–PORT, and
in light of our continued assessment of
our internal cybersecurity risk profile,
we have re-evaluated whether, in this
particular case, we can meaningfully
reduce the sensitivity of the data we
will maintain while continuing to
achieve our regulatory objectives. This
recent re-evaluation has led us to
determine that modifying the filing
requirements for Form N–PORT is
necessary. Additionally, as explained
above, the modifications affect the
timeliness of the data for the
Commission’s analysis but would not
affect the current requirements
regarding the content of the data that is
51 Because of the 6-month non-public phase in
period for Form N–PORT, this report would not be
made public. See supra footnote 47 and
accompanying text.
52 Because 60 days after the fund’s April 30, 2019
fiscal quarter end falls on a Saturday (June 29,
2019), the report on Form N–PORT must be filed
with the Commission no later than July 1, 2019 (the
next business day). See General Instruction A to
Form N–PORT (‘‘If the due date falls on a weekend
or holiday, the filing deadline will be the next
business day.’’). In order to make General
Instruction A clearer for registrants, we are moving
the due date instruction to the end of the paragraph.
See amended General Instruction A to Form N–
PORT.
53 See 5 U.S.C. 553(b)–(c).
54 5 U.S.C. 553(b)(3)(B).
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made public or when the data is made
public. Given the limited nature of this
change, and previous delays in
implementation of the rule, we find that
it is appropriate to implement this
modification as an interim final rule.
Soliciting public comment on this issue
would be neither necessary, practicable,
nor in the public interest.
Independently, providing immediate
certainty to funds is critical because we
understand that many funds are
currently designing and testing their
systems and procedures in light of the
April 1, 2019 expiration of temporary
rule 30b1–9(T)’s retention requirement.
Funds need to know as soon as
practicable that there will be a
modification in the requirement for
filing reports on Form N–PORT through
the EDGAR system, and that as a result
they will have to make changes to the
timing of their reports. For example,
absent the certainty provided by a final
rule, funds may not be prepared to make
all three Form N–PORT filings at
quarter-end, especially in light of the
compliance dates for larger fund groups.
Providing notice and comment would
defeat this goal of giving certainty as to
funds’ obligations in light of the
modifications stemming from the
Commission’s recent cybersecurity
initiatives.55 Under these
circumstances, soliciting public notice
and comment would be unnecessary,
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 amendments to rule 30b1–
9 and Form N–PORT outlined above.56
The APA also generally requires that
an agency publish an adopted rule in
the Federal Register at least 30 days
before it becomes effective. This
requirement does not apply, however, if
the agency finds good cause for making
the rule effective sooner.57 For the
reasons discussed above, and in order to
give registrants immediate relief from
55 We similarly do not believe that notice and
comment on the amendment to Form N–LIQUID are
necessary given the limited and voluntary nature of
the amendment.
56 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).
57 5 U.S.C. 553(d)(3).
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filing reports on Form N–PORT with the
Commission each month, we find good
cause to make the rule effective upon
publication in the Federal Register.
II. Economic Analysis
A. Introduction
Our modifications to the timing
requirements for filing Form N–PORT
will require funds to file each monthly
report on Form N–PORT with the
Commission no later than 60 days after
a fund’s fiscal quarter end. Information
for the first two months of each fund’s
fiscal quarter will continue to be nonpublic and available for use by the
Commission. Information reported on
the quarter-end report on Form N–PORT
will be made public immediately upon
filing and thus will continue to be
required to be publicly available with a
delay of, at most, 60 days after the end
of the fiscal quarter.58 In addition, funds
will be required to maintain in their
records the information that is required
to be included on Form N–PORT no
later than 30 days after the end of each
month.
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 the change in the timing
of the EDGAR submission requirement
for reports on Form N–PORT and the
associated recordkeeping requirement.
B. Economic Baseline
The reporting and disclosure
obligations created by the 2016 adoption
of Form N–PORT serve as the baseline
against which the costs and benefits as
well as the effects on efficiency,
competition, and capital formation of
the modified timing requirements are
discussed.59 Additionally, the baseline
takes into account the temporary rule
that the Commission adopted on
December 8, 2017, which delayed the
initial reporting of Form N–PORT on
EDGAR by nine months.60
Currently, the Commission generally
receives portfolio information from
registered management investment
companies (other than money market
funds and SBICs) on Form N–Q and
Form N–CSR on a quarterly basis, 60
and 70 days after the end of the quarter,
respectively. Once the temporary final
rule expires on June 1, 2019, funds in
larger fund groups would be required to
58 As discussed above, see supra footnote 32,
certain data fields on the quarter-end report on
Form N–PORT will continue to be masked from the
public. See General Instruction F of Form N–PORT.
59 See Adopting Release, supra note 3, section III.
60 See Temporary Final Rule Release, supra
footnote 9, at note 5.
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7985
submit reports on Form N–PORT within
30 days after each month-end.61 The
reports on Form N–PORT for the first
two months of each fund’s fiscal quarter
would not be made public. Information
reported on the quarter-end report, with
the exception of the items identified in
General Instruction F of Form N–PORT,
would be made publicly available with
a delay of 60 days after the end of the
fiscal quarter. As a result, the
Commission would confidentially
maintain for at least 30 days Form N–
PORT information that would
eventually become publicly available.
The entities affected by the modified
timing of the EDGAR submission
requirement for reports on Form N–
PORT are the funds that will report
using this form and their investors. As
of the end of 2017, approximately 101.9
million individuals owned shares of
registered investment companies,
representing 57.3 million or 45.4% of
U.S. households.62 As of September
2018, we estimate that there were
11,619 funds required to file Form N–
PORT (i.e., 8,976 mutual funds
(excluding money market funds), 1,939
ETFs (including 8 ETFs organized as
UITs and 1,931 ETFs that are
management investment companies),
and 704 closed-end funds (excluding
SBICs)).63
C. Benefits and Costs of the Modified
Timing Requirement for Filing Form
N–PORT
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, the adoption of
Form N–PORT will modernize fund
reporting, improve the ability of the
Commission to fulfill its regulatory
61 See
supra footnotes 11–12 and accompanying
text.
62 2018 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/2018_
factbook.pdf.
63 Counts of mutual funds and ETFs are based on
data from the ICI and the count of closed-end funds
is based on registrants’ filings with the Commission
on Forms N–SAR and N–Q and data from
Morningstar Direct as of September 2018.
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functions, and allow investors to make
more informed investment decisions.64
The data that the Commission will
receive on Form N–PORT is sensitive
and includes portfolio information for
the first two months of a fund’s fiscal
quarter that is designated non-public,
information for the third month of a
fund’s fiscal quarter before its scheduled
publication, and information for the
third month of a fund’s fiscal quarter
from non-public fields. The data at risk
could, for example, harm fund
shareholders by expanding the
opportunities for professional traders
and others to exploit this information.65
In addition, an unauthorized intrusion
could affect the Commission’s future
ability to collect the data necessary to
support its mission.
We believe that increasing the delay
in when funds must submit reports on
Form N–PORT will reduce the value of
non-public data maintained by the
Commission. Reducing the value of this
data may both reduce a potential
motivation for cyberattacks and mitigate
potential costs to funds and their
investors in the event a fund’s nonpublic data is exposed. First, the
extension of the fiscal quarter-end filing
deadline from 30 to 60 days allows the
data in the quarter-end report on Form
N–PORT to be public immediately upon
filing, with the exception of the nonpublic fields described above.66 As a
result, the Commission will no longer
have to keep this data non-public for at
least a month after filing, thereby
reducing the volume of non-public data
maintained in our systems and the
associated cybersecurity risks. Second,
under the modified timing of the
64 See Adopting Release, supra footnote 3, at
section II.A.
65 The academic literature has argued that certain
trading strategies by outside investors that make use
of a fund’s timely portfolio information, including
trading ahead of a fund and mimicking a fund’s
holdings, can be costly for funds and their
investors, particularly for funds that execute large
orders or employ proprietary trading strategies.
(See, e.g., ICI, The Potential Effects of More
Frequent Portfolio Disclosure on Mutual Fund
Performance, Perspective Vol. 7, No. 3 (June 2001)
and Vikas Agarwal, et al., Mandatory Portfolio
Disclosure, Stock Liquidity, and Mutual Fund
Performance, The Journal of Finance, Vol. 70, No.
6 (Dec. 2015)). In addition, the academic literature
has studied the economic effects of cybersecurity
risk in various settings. For example, one paper (See
Campbell, Katherine, et. al., The economic cost of
publicly announced information security breaches:
empirical evidence form the stock market, Journal
of Computer Security 11 (2003)) finds evidence
suggesting that a firm’s stocks price tends to
decrease upon the announcement that an
information security breach involving unauthorized
access to confidential data has happened at the
firm. However, we are not aware of any studies that
would allow us to quantify the economic costs of
a cybersecurity breach that revealed a fund’s
confidential portfolio information.
66 See supra footnote 32.
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EDGAR filing requirement for reports on
Form N–PORT, a fund’s submission for
the first and second months of a fund’s
fiscal quarter will be delayed until the
time that the submission for the quarterend report is filed and made public. We
believe that these changes to the timing
requirements for filing Form N–PORT
will reduce the sensitivity of the data
the Commission stores and maintains.
The portion of the Form N–PORT data
that will be made publicly available and
the timing of the public availability will
not change. As a result, the benefits of
the disclosure to public users of the data
would remain unchanged from the
baseline. These benefits include, for
example, an increase in the
transparency of a fund’s investment
strategies and an increase in the ability
of investors to identify more efficiently
the funds’ risk exposures, differentiate
investment companies based on their
investment strategies, and make more
informed investment decisions
associated with the public availability of
this data.
Increasing the Form N–PORT filing
delay and requiring funds to maintain in
their records the information that is
required to be included on Form N–
PORT no later than 30 days after the end
of each month likely will not
meaningfully change the costs for
submitting the form and keeping records
borne by fund groups, as the timing of
collecting the information, the amount
of information to be submitted, and the
number of forms to complete is identical
to the baseline.67 In addition, the
current compliance dates for Form N–
PORT will not change.68 In light of our
ongoing assessment of our internal
cybersecurity risk profile, we have reevaluated whether, in this particular
case, we can meaningfully reduce the
sensitivity of the data we will maintain
while continuing to achieve our
regulatory objectives. On the one hand,
the modifications in the EDGAR
submission requirement will delay the
filings of Form N–PORT data with the
Commission in the ordinary course.
Compared to the baseline, the data for
monthly filings will be less current, by
67 To the extent that it is more efficient for fund
groups to submit all three monthly filings of Form
N–PORT in one batch at quarter-end, rather than
individually every month, the costs borne by fund
groups may be marginally reduced under this
increased delay.
68 As discussed above, funds in larger fund
groups with fiscal quarters ending in March, 2019,
which may not be prepared to make initial filings
of all three months of Form N–PORT reports on a
single date, will only be required to file reports on
Form N–PORT for the last month of that fiscal
quarter. Larger fund groups with fiscal quarters
ending in April, 2019, will only be required to file
reports on Form N–PORT for the last two months
of that fiscal quarter.
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an average of 60 days. The delay will
reduce the data’s utility to the
Commission for analyses of funds in the
course of monitoring for industry trends
and identifying issues for examination
or inquiry. The impact of the delay on
the Commission’s analytical capabilities
will vary across applications, and for
certain applications, the impact of
greater data staleness would decrease
over time as the Commission builds up
historical data. For example, historical
trends inferred from a long time series
of data would, in many cases, not be
significantly affected by the delay in
filing of monthly information.
Moreover, requiring funds to maintain
the Form N–PORT data in their records
30 days after the end of each month will
ensure that the Commission can receive
more timely information when
necessary.69
D. Effects on Efficiency, Competition,
and Capital Formation
The modification in the timing of the
EDGAR submission requirements will—
without materially affecting our ability
to obtain data when we need it—reduce
the risk of cybersecurity threats and
thereby decrease the likelihood that
exposure of sensitive data could hamper
the Commission’s future ability to
collect the data necessary to support its
mission. As a result, we believe that the
modification will help the Commission
maintain efficient capital markets
through appropriate supervision and
regulation.
A reduction in cybersecurity risk will
also reduce the likelihood of related
adverse impacts on an affected fund and
its investors, as discussed above. To the
extent that investors anticipate the
potential impacts of cybersecurity risks,
a reduction in this risk could increase
the amount invested in funds. If this
additional investment in funds does not
represent substitution away from other
forms of capital formation, such as
direct investments in operating
companies, the reduction in risk could
thereby improve capital formation. We
believe, however, that any such effect
would likely be small.
Similarly, we believe that the
modification would not have any
significant competitive effects, as the
delay affects all filers of Form N–PORT
uniformly.
69 In addition, the Commission will continue to
receive reports on Form N–LIQUID, which provides
us with more timely information on certain
liquidity events at a fund. In order to allow funds
the opportunity to communicate this information,
we are amending Form N–LIQUID to provide for a
voluntary explanatory notes section. See Part E of
Amended Form N–LIQUID.
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E. Alternatives
As an alternative to requiring monthly
portfolio reporting (filed on a quarterly
basis), the Commission considered
requiring quarterly portfolio reporting.
Under the alternative, the Commission
would no longer receive non-public data
for monthly portfolio reports related to
the first two months in a fund’s fiscal
quarter, thereby reducing the amount of
non-public information the Commission
stores and maintains and further
reducing the risk of cybersecurity risks.
In addition, the alternative would likely
reduce the costs for funds to file Form
N–PORT. However, the alternative
would eliminate the additional
information in the monthly portfolio
reporting that will allow the
Commission to analyze the evolution of
portfolio holdings and the fluctuations
in the values of portfolio investments
within a fund’s fiscal quarter. We
continue to believe that the higher
frequency of monthly portfolio reporting
will be useful to the staff to perform
analyses of funds in the course of
monitoring for industry trends or
identifying issues for examination or
inquiry, even if the Commission
receives this information on a more
delayed basis in the ordinary course.70
Our modifications to the timing of
filings and not the frequency of data
reflect our belief that the greater
usefulness to the Commission of
monthly portfolio reporting on a
quarterly basis justifies any attendant
risk and larger costs for funds to report
monthly rather than quarterly portfolio
information.
As an alternative to requiring funds to
file all three monthly Forms N–PORT
within 60 days of a fund’s fiscal quarter
end, we considered requiring funds to
submit Form N–PORT within 60 days of
the end of each month. While this
alternative would increase the delay in
when funds would be required to
submit Forms N–PORT for all three
months of a fund’s fiscal quarter
compared to the baseline, the delay
would be shorter compared to the
modified timing requirement we are
adopting today for the first two months
of a fund’s fiscal quarter. As a result, the
decrease in the sensitivity of the data
the Commission stores and maintains
and the resulting reduction in
cybersecurity risk would be smaller
under this alternative. We acknowledge
the shorter delay in the Commission’s
70 Our experience with large hedge fund adviser
reporting on Form PF has shown us that quarterly
reporting of monthly data, with a 60-day delay in
its submission, is useful in providing regulators
with data to identify emerging trends and risks. See
supra footnote 39.
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receipt of data for the first two months
under this alternative would have a
smaller impact on the Commission’s
analytical capabilities than the
modification to filing that we are
adopting. However, as discussed above
in section II.C, we expect this impact to
(i) vary across applications and (ii) be
attenuated by the requirement that
funds maintain the Form N–PORT data
in their records 30 days after the end of
each month, which will ensure that the
Commission can receive more timely
information, when necessary.
III. Paperwork Reduction Act
The Commission is modifying the
requirement for reports on Form
N–PORT to require all three monthly
Form N–PORT reports for a particular
fiscal quarter be filed with the
Commission 60 days after the end of
that quarter. Amended rule 30b1–9 will
also require funds to maintain in their
records the information that is required
to be included on Form N–PORT no
later than 30 days after the end of each
month.71 We do not believe that 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’’).72 While the
reporting dates for Form N–PORT will
change, the number of Form N–PORT
filings, timing of collecting the data, and
other related burdens will remain the
same. As a result, the Commission
believes that the current PRA burden
estimates for the existing collection of
information requirements remain
appropriate.73
IV. Statutory Authority
We are adopting amendments to the
rule 30b1–9, Form N–PORT, and Form
N–LIQUID under the authority set forth
in the Investment Company Act,
particularly sections 6(c), 8, 30, 31, and
38 thereof [15 U.S.C. 80a et seq.], and
44 U.S.C. 3506.
71 We previously noted 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. See
Temporary Final Rule Release, supra footnote 9, at
section III.A.
72 44 U.S.C. 3501 through 3521.
73 ‘‘Form N–PORT Under the Investment
Company Act, Monthly Portfolio Investments
Report’’ (OMB Control No. 3235–0730). We
similarly do not believe that our change to Form
N–LIQUID will make any substantive modifications
to the existing collection of information
requirements within the meaning of the PRA. See
‘‘Form N–LIQUID Under the Investment Company
Act, Current Report, Open-End Investment
Company Liquidity’’ (OMB Control No. 3235–0754).
PO 00000
Frm 00009
Fmt 4700
Sfmt 4700
7987
List of Subjects in 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 is revised to
read as follows:
■
§ 270.30b1–9
Monthly report.
Each registered management
investment company or exchange-traded
fund organized as a unit investment
trust, or series thereof, other than a
registered open-end management
investment company that is regulated as
a money market fund under § 270.2a–7
or a small business investment company
registered on Form N–5 (§§ 239.24 and
274.5 of this chapter), must file a
monthly report of portfolio holdings on
Form N–PORT (§ 274.150 of this
chapter), current as of the last business
day, or last calendar day, of the month.
A registered investment company that
has filed a registration statement with
the Commission registering its securities
for the first time under the Securities
Act of 1933 is relieved of this reporting
obligation with respect to any reporting
period or portion thereof prior to the
date on which that registration
statement becomes effective or is
withdrawn. Each registered investment
company that is required to file reports
on Form N–PORT must maintain in its
records the information that is required
to be included on Form N–PORT no
later than 30 days after the end of each
month. Such information 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.
Reports on Form N–PORT for each
month in each fiscal quarter of a
registered investment company must be
filed with the Commission no later than
60 days after the end of such fiscal
quarter.
E:\FR\FM\06MRR1.SGM
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7988
Federal Register / Vol. 84, No. 44 / Wednesday, March 6, 2019 / Rules and Regulations
PART 274—FORMS PRESCRIBED
UNDER THE INVESTMENT COMPANY
ACT OF 1940
3. The general authority citation for
part 274 continues to read as follows:
■
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s,
78c(b), 78l, 78m, 78n, 78o(d), 80a–8, 80a–24,
80a–26, 80a–29, and Pub. L. 111–203, sec.
939A, 124 Stat. 1376 (2010), unless otherwise
noted.
*
*
*
*
*
4. Section 274.150 is revised to read
as follows:
■
§ 274.150 Form N–PORT, Monthly portfolio
holdings report.
(a) Except as provided in paragraph
(b) of this section, this form shall be
used by registered management
investment companies or exchangetraded funds organized as unit
investment trusts, or series thereof, to
file reports pursuant to § 270.30b1–9 of
this chapter not later than 60 days after
the end of each fiscal quarter.
(b) Form N–PORT shall not be filed by
a registered open-end management
investment company that is regulated as
a money market fund under § 270.2a–7
of this chapter or a small business
investment company registered on Form
N–5 (§§ 239.24 and 274.5 of this
chapter), or series thereof.
Note: The text of Form N–PORT will not
appear in the Code of Federal Regulations.
5. Form N–PORT (referenced in
§ 274.150) is amended as follows:
■
Note: The text of Form N–PORT does not,
and these amendments will not, appear in
the Code of Federal Regulations.
FORM N-PORT
MONTHLY PORTFOLIO
INVESTMENTS REPORT
Form N-PORT is to be used by a
registered management investment
company, or an exchange-traded fund
organized as a unit investment trust, or
series thereof (‘‘Fund’’), other than a
Fund that is regulated as a money
market fund (‘‘money market fund’’)
under rule 2a-7 under the Investment
Company Act of 1940 [15 U.S.C. 80a]
(‘‘Act’’) (17 CFR 270.2a-7) or a small
business investment company (‘‘SBIC’’)
registered on Form N-5 (17 CFR 239.24
and 274.5), to file reports of monthly
portfolio holdings pursuant to rule
30b1-9 under the Act (17 CFR 270.30b19). The Commission may use the
information provided on Form N-PORT
in its regulatory, enforcement,
examination, disclosure review,
inspection, and policymaking roles.
VerDate Sep<11>2014
18:28 Mar 05, 2019
Jkt 247001
GENERAL INSTRUCTIONS
PART E. Explanatory Notes (if any)
A. Rule as to Use of Form N-PORT
Registrants may provide any
information it believes would be helpful
in understanding the information
reported in response to any Item of this
Form.
*
*
*
*
*
Form N-PORT is the reporting form
that is to be used for monthly reports of
Funds other than money market funds
and SBICs under section 30(b) of the
Act, as required by rule 30b1–9 under
the Act (17 CFR 270.30b1-9). Funds
must report information quarterly about
their portfolios and each of their
portfolio holdings as of the last business
day, or last calendar day, of each month.
A registered investment company that
has filed a registration statement with
the Commission registering its securities
for the first time under the Securities
Act of 1933 is relieved of this reporting
obligation with respect to any reporting
period or portion thereof prior to the
date on which that registration
statement becomes effective or is
withdrawn.
Reports on Form N-PORT must
disclose portfolio information as
calculated by the fund for the reporting
period’s ending net asset value
(commonly, and as permitted by rule 2a4, the first business day following the
trade date). A Fund must maintain in its
records the information that is required
to be included on Form N-PORT no later
than 30 days after the end of each
month. Such information shall be
treated as a record under section
31(a)(1) of the Act and rule 31a-1(b)
thereunder subject to the requirements
of rule 31a-2(a)(2). Reports on Form
N-PORT for each month in each fiscal
quarter of a fund must be filed with the
Commission no later than 60 days after
the end of such fiscal quarter. If the due
date falls on a weekend or holiday, the
filing deadline will be the next business
day.
A Fund may file an amendment to a
previously filed report at any time,
including an amendment to correct a
mistake or error in a previously filed
report. A Fund that files an amendment
to a previously filed report must provide
information in response to all items of
Form N-PORT, regardless of why the
amendment is filed.
*
*
*
*
*
6. Form N–LIQUID (referenced in
§ 274.223) is amended as follows:
■
Note: The text of Form N–LIQUID does not,
and these amendments will not, appear in
the Code of Federal Regulations.
FORM N-LIQUID
CURRENT REPORT
OPEN END MANAGEMENT
INVESTMENT COMPANY LIQUIDITY
*
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*
*
Frm 00010
*
Fmt 4700
*
Sfmt 4700
By the Commission.
Dated: February 27, 2019.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03958 Filed 3–5–19; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Parts 4 and 11
[Docket No. RM19–13–000; Order No. 857]
Preliminary Permits, Qualifying
Conduit Hydropower Facilities, and
Commencement for Payment of
Annual Charges
Federal Energy Regulatory
Commission, Department of Energy.
ACTION: Final rule.
AGENCY:
The Federal Energy
Regulatory Commission (Commission)
issues this final rule to amend its
regulations to conform to the enacted
America’s Water Infrastructure Act of
2018 (Water Infrastructure Act). This
final rule revises regulations on
preliminary permits, qualifying conduit
hydropower facilities, and
commencement for payment of annual
charges. All revisions in this final rule
are ministerial in nature.
DATES: This rule will become effective
April 5, 2019.
FOR FURTHER INFORMATION CONTACT:
Haley McLoud (Legal Information),
Office of the General Counsel, Federal
Energy Regulatory Commission, 888
First Street NE, Washington, DC
20426, (202) 502–8807,
Haley.McLoud@ferc.gov.
Christopher Chaney (Technical
Information), Office of Energy
Projects, Federal Energy Regulatory
Commission, 888 First Street NE,
Washington, DC 20426, (202) 502–
6778, Christopher.Chaney@ferc.gov.
Nicholas Jayjack (Technical
Information), Office of Energy
Projects, Federal Energy Regulatory
Commission, 888 First Street NE,
Washington, DC 20426, (202) 502–
6073, Nicholas.Jayjack@ferc.gov.
SUPPLEMENTARY INFORMATION:
SUMMARY:
E:\FR\FM\06MRR1.SGM
06MRR1
]]>Agencies
[Federal Register Volume 84, Number 44 (Wednesday, March 6, 2019)]
[Rules and Regulations]
[Pages 7980-7988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03958]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 270 and 274
[Release No. IC-33384; File No. S7-02-19]
RIN 3235-AL42
Amendments to the Timing Requirements for Filing Reports on Form
N-Port
AGENCY: Securities and Exchange Commission.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
adopting an interim final rule that will require reports on Form N-PORT
for each month in a fiscal quarter to be filed with the Commission not
later than 60 days after the end of that fiscal quarter (as opposed to
filing each monthly report no later than 30 days after the end of each
month). The monthly report on Form N-PORT for the third month of the
quarter (the ``quarter-end report'') will continue to become publicly
available (i.e., all portions of the quarter-end report, with the
exception of the items identified in General Instruction F of Form N-
PORT, will be made public upon filing). The monthly reports on Form N-
PORT for the first and second months of the fiscal quarter will remain
non-public. We are also amending our regulations and Form N-PORT to
require that funds, no later than 30 days after the end of each month,
maintain in their records the information that is required to be
included in Form N-PORT. Registrants will promptly make such records
available to the Commission upon request. Finally, we are amending Form
N-LIQUID to provide for a voluntary explanatory notes section.
Importantly, these amendments in no way affect the amount or timing of
the information that will be made available to the public.
DATES: Effective March 6, 2019. The applicable compliance dates are
discussed in the Supplementary Information section of this Interim
Final Rule.
FOR FURTHER INFORMATION CONTACT: Jacob D. Krawitz, Branch Chief, or
Brian McLaughlin Johnson, Assistant Director, at (202) 551-6792,
Rulemaking Office, Division of Investment Management, Securities and
Exchange Commission, 100 F Street NE, Washington, DC 20549.
SUPPLEMENTARY INFORMATION: The Commission is amending rule 30b1-9 [17
CFR 270.30b1-9] under the Investment Company Act [15 U.S.C. 80a-1 et
seq.] and Forms N-PORT [referenced in 17 CFR 274.150] and N-LIQUID
[referenced in 17 CFR 274.223] under the Investment Company Act.
I. Discussion
In connection with the Commission's ongoing evaluation of its
collection of sensitive and non-public data, and in light of the
frequency, volume, and complexity, as well as the potentially sensitive
and non-public nature, of much of the data collected on Form N-PORT,\1\
the Commission is modifying the timing requirements for filing monthly
reports on Form N-PORT. We are amending rule 30b1-9 and Form N-PORT to
require funds to file a report on Form N-PORT for each month in the
fund's fiscal quarter not later than 60 days after the end of that
fiscal quarter. In addition, we are amending rule 30b1-9 and Form N-
PORT to require funds, no later than 30 days after the end of each
month, to maintain in their records
[[Page 7981]]
the information that is required to be included in Form N-PORT.\2\
Importantly, these amendments in no way affect the amount or timing of
the information that will be made available to the public.
---------------------------------------------------------------------------
\1\ See Statement on Cybersecurity (September 20, 2017),
available at https://www.sec.gov/news/public-statement/statement-clayton-2017-09-20; see also Testimony before the Financial Services
and General Government Subcommittee of the Senate Committee on
Appropriations (June 5, 2018), available at https://www.sec.gov/news/testimony/testimony-financial-services-and-general-government-subcommittee-senate-committee.
\2\ We also are amending Form N-LIQUID to provide for a
voluntary explanatory notes section. See amended Form N-LIQUID.
---------------------------------------------------------------------------
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.\3\ 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.\4\ Form N-PORT is a portfolio holdings reporting form that will
be filed by all registered management investment companies, other than
money market funds and small business investment companies (``SBICs''),
and by unit investment trusts that operate as exchange-traded funds
(collectively, ``funds'').\5\ Under the rule the Commission adopted in
2016, after the compliance date, funds must file reports on Form N-PORT
each month, no later than 30 days after month-end, using the
Commission's EDGAR system.\6\ The compliance date for rule 30b1-9 was
June 1, 2018 for larger fund groups and June 1, 2019 for smaller fund
groups.\7\
---------------------------------------------------------------------------
\3\ Investment Company Reporting Modernization, Investment
Company Act Release No. 32314 (Oct. 13, 2016) [81 FR 81870 (Nov. 18,
2016)] (``Adopting Release'').
\4\ Reports on Form N-PORT are required to be filed in an
extensible markup language (``XML'') structured data format.
\5\ See Form N-PORT.
\6\ See rule 30b1[dash]9; see General Instruction C (Filing of
Reports) of Form N-PORT; see also Adopting Release, supra footnote
3, at section II.H.1.
\7\ When we adopted Form N-PORT, we provided for a tiered set of
compliance dates based 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. 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. See Adopting Release,
supra footnote 3, at section II.H.1.
---------------------------------------------------------------------------
In 2017, the Commission's Chairman initiated an assessment of the
Commission's internal cybersecurity risk profile and its approach to
cybersecurity from a regulatory and oversight perspective.\8\ 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 the Commission's EDGAR system as well as the non-public
information collected and held by the Commission.\9\
---------------------------------------------------------------------------
\8\ See Statement on Cybersecurity, supra footnote 1.
\9\ See Update on Review of 2016 Cyber Intrusion Involving EDGAR
System (Oct. 2, 2017), available at https://www.sec.gov/news/press-release/2017-186; see also Investment Company Reporting
Modernization, Investment Company Act Release No. 32936 (Dec. 8,
2017) [82 FR 58731 (Dec. 14, 2017)] (``Temporary Final Rule
Release''), at note 17 and accompanying text.
---------------------------------------------------------------------------
On December 8, 2017, while these efforts were ongoing, the
Commission determined to delay by nine months the requirement that
funds file reports on Form N-PORT through the EDGAR system.\10\ The
Commission also adopted temporary rule 30b1-9(T), which, until April 1,
2019, requires larger fund groups to satisfy their reporting
obligations by maintaining in their records the information required to
be included in Form N-PORT.\11\ After such time, larger fund groups
must file reports on Form N-PORT through the EDGAR system.\12\ Smaller
fund groups must begin to file reports on Form N-PORT through the EDGAR
system by April 30, 2020.\13\
---------------------------------------------------------------------------
\10\ See id.
\11\ See rule 30b1-9(T); see also Temporary Final Rule Release,
supra footnote 9.
\12\ See Temporary Final Rule Release, supra footnote 9.
\13\ See id.
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B. Commission's Determination To Modify the Timing Requirements for
Filing Reports on Form N-PORT
The Commission receives, stores, and transmits a substantial amount
of data, including sensitive and non-public data. There are certain
types of sensitive data that the Commission obtains from market
participants in order to fulfill its mission.\14\ The collection,
storage, analysis, availability, and protection of data have become
fundamental to the protection of investors, the orderly function and
performance of our capital markets, market participants, and the
Commission.\15\
---------------------------------------------------------------------------
\14\ See Statement on Cybersecurity, supra footnote 1.
\15\ See id.
---------------------------------------------------------------------------
In that regard, maintaining effective cybersecurity practices
requires an ongoing evaluation of the data an organization obtains and
protects. When determining when and how to collect data, the Commission
evaluates its approach in light of the importance to its mission of
each type of data we receive, particularly in the case of sensitive,
non-public information.\16\
---------------------------------------------------------------------------
\16\ See id.
---------------------------------------------------------------------------
The Commission periodically assesses, as part of its cybersecurity
efforts, whether alternatives exist that would allow the Commission to
fulfill its mission while reducing the sensitivity of data we
collect.\17\ For example, in 2018, after concluding that the Commission
would be able to achieve its regulatory objectives without taking in
certain sensitive personally identifiable information, the Commission
eliminated the requirement for filers of certain forms to provide us
with their social security numbers, foreign identity numbers or date or
place of birth.\18\ We have also reduced the market sensitivity of the
non-public data we collect by obtaining it on a delayed basis, when
appropriate.\19\
---------------------------------------------------------------------------
\17\ See id.
\18\ See Amendments to Forms and Schedules To Remove Provision
of Certain Personally Identifiable Information, Investment Company
Act Release No. 33077 (Apr. 24, 2018) [83 FR 22190 (May 14, 2018)].
\19\ See Statement on Cybersecurity, supra footnote 1. For
example, large private equity advisers and smaller private fund
advisers file reports on Form PF 120 days from the end of their
fiscal years, while large hedge fund advisers file reports 60 days
from the end of each fiscal quarter. See Reporting by Investment
Advisers to Private Funds and Certain Commodity Pool Operators and
Commodity Trading Advisors on Form PF, at section II.B., Investment
Advisers Act Release No. 3308 (Oct. 31, 2011) [76 FR 71228 (Nov. 16,
2011)] (``Form PF Adopting Release'') (noting in connection with the
non-public nature of Form PF data that the Commission had extended
timelines for advisers' filing fund information compared to the
proposal and that, as a result, filings will contain less current,
and therefore less sensitive, data).
---------------------------------------------------------------------------
For many years, the Commission has collected registered fund
portfolio data on a quarterly basis on Forms N-Q and N-CSR, both of
which are public filings.\20\ We acknowledged that this data was
sensitive, and addressed that sensitivity by requiring reports on Form
N-Q to be filed no later than 60 days after the end of the first and
third quarters of a fund's fiscal year, and Form N-CSR no later than 70
days after the end of the second and fourth quarters.\21\ We also made
this data public upon filing.
---------------------------------------------------------------------------
\20\ See Adopting Release, supra footnote 3, at note 27.
\21\ See 17 CFR 270.30b1-5 (rule 30b1-5) (requiring management
companies, other than SBICs, to file reports on Form N-Q no more
than 60 days after the close of the first and third quarters of each
fiscal year); 17 CFR 270.30b2-1 (rule 30b2-1) (requiring management
companies to file reports on Form N-CSR no later than 10 days after
the transmission to stockholders of any report required to be
transmitted to stockholders under rule 30e-1). See also rules 17 CFR
270.30e-1 (rule 30e-1) and 17 CFR 270.30e-2 (rule 30e-2) (requiring
management companies and certain UITs to transmit to stockholders
semi-annual reports containing, among other things, the fund's
portfolio schedules, no more than 60 days after the close of the
second and fourth quarters of each fiscal year). These reports
include portfolio holdings information as required by Regulation S-
X. See 17 CFR 210.12-12, et seq. (rule 12-12 of Regulation S-X).
---------------------------------------------------------------------------
[[Page 7982]]
In adopting Form N-PORT in 2016, the Commission changed the
frequency of reporting and filing fund portfolio holdings information
to monthly, with the first two months of a fiscal quarter filed
confidentially with the Commission.\22\ In making this 2016 change, the
Commission acknowledged tradeoffs raised by commenters between (i) data
sensitivity and data security concerns with this increased frequency of
reporting of confidential information, and (ii) countervailing concerns
that quarterly portfolio reports can quickly become stale due to the
turnover of portfolio securities and fluctuations in the values of
portfolio investments.\23\ We also noted that requiring funds to file
confidential reports more than 30 days after month-end would provide
less timely data to the Commission, reducing its utility to the
Commission.\24\ We stated at that time that the filing of monthly
data--which our amendments preserve--would triple the amount of data
reported to the Commission in a given year, and that this should
enhance the ability of staff to perform analyses of funds in the course
of monitoring for industry trends, or identifying issues for
examination or inquiry.\25\
---------------------------------------------------------------------------
\22\ See infra footnote 32.
\23\ See Adopting Release, supra footnote 3, at section II.A.3.
\24\ See id., at section II.A.4.
\25\ See id., at section II.A.3.
---------------------------------------------------------------------------
At the time, and with the information then available about
cybersecurity risks and related tradeoffs on data security, we
determined that more frequent reporting was warranted.\26\ But we also
observed that Commission staff would carefully evaluate the data
security protocols that will apply to non-public data reported on Form
N-PORT in light of the specific recommendations and concerns raised by
commenters.\27\ We also directed the staff, in advance of the form's
compliance date, to review the controls and systems in place for the
use and handling of non-public information reported on Form N-PORT.\28\
As discussed above, in 2017, the Commission postponed the initial
reporting of Form N-PORT on EDGAR by nine months.\29\
---------------------------------------------------------------------------
\26\ Id.
\27\ Id.
\28\ Id.
\29\ See Temporary Final Rule Release, supra footnote 9.
---------------------------------------------------------------------------
The evaluation of the data security protocols relating to Form N-
PORT, in addition to our ongoing assessment of our internal
cybersecurity risk profile, have led us to reevaluate whether, in this
particular case, we can meaningfully reduce the sensitivity of the data
we will maintain while continuing to achieve our regulatory objectives.
This re-evaluation has led us to determine that allowing monthly data
on Form N-PORT to be reported to the Commission on a more delayed
basis--while in no way reducing the amount of data that we ultimately
receive, and also preserving the staff's ability to require production
of the data on a more timely basis upon request--will allow the
Commission to fulfill its mission, while meaningfully reducing the
potential cybersecurity risks arising from the collection and
maintenance of sensitive non-public data on EDGAR.\30\ We are therefore
amending rule 30b1-9 and Form N-PORT to require funds to file reports
on Form N-PORT for each month in a fiscal quarter not later than 60
days after the end of that quarter.\31\ The reports on Form N-PORT for
the first two months of the quarterly filing period will continue to be
non-public and the quarter-end report (i.e., the last month of the
quarter) will become publicly available immediately upon filing, with
the exception of the items identified in General Instruction F of Form
N-PORT, which will continue to remain non-public.\32\
---------------------------------------------------------------------------
\30\ The Commission has not considered any other changes to Form
N-PORT, rules, other forms, and amendments besides those discussed
in this release. Additionally, if any of the provisions of these
amendments, or the application thereof to any person or
circumstance, is held to be invalid, such invalidity shall not
affect other provisions or application of such provisions to other
persons or circumstances that can be given effect without the
invalid provision or application.
\31\ See amended rule 30b1-9; see also conforming amendments to
17 CFR 274.150(a) and amended General Instruction A of Form N-PORT.
Funds may, at their discretion, file reports on Form N-PORT prior to
the 60-day deadline.
\32\ Certain data fields on the quarter-end report on Form N-
PORT, such as Highly Liquid Investment Minimum (Item B.7),
derivatives transactions (Item B.8), country of risk and economic
exposure (Item C.5.b), delta (Items C.9.f.v, C.11.c.vii, or
C.11.g.iv), liquidity classification for portfolio investments (Item
C.7), miscellaneous securities (Part D), or explanatory notes
related to any of those topics (Part E) will continue to be masked
from the public. See General Instruction F of Form N-PORT.
---------------------------------------------------------------------------
As is the case under temporary rule 30b1-9(T), in order to continue
to provide for Commission access to the information required to be
included in Form N-PORT on a more timely basis, we are also amending
rule 30b1-9 to require funds to maintain in their records the
information that is required to be included on Form N-PORT not later
than 30 days after the end of each month.\33\ Consistent with current
record retention requirements for registered investment companies, such
information must be treated as a record under 15 U.S.C. 80a-30(a)(1)
(section 31(a)(1) of the Act) and 17 CFR 270.31a-1(b) (rule 31a-1(b))
thereunder, subject to the requirements of 17 CFR 270.31a-2(a)(2) (rule
31a-2(a)(2)).\34\ While neither amended rule 30b1-9 nor rule 31a-2
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 for each month at quarter end.
---------------------------------------------------------------------------
\33\ See amended rule 30b1-9.
\34\ 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).
---------------------------------------------------------------------------
In reassessing whether, in this particular case, we can
meaningfully reduce the sensitivity of the data we will maintain while
continuing to achieve our regulatory objectives, we considered that
these changes only relate to when funds must file reports on Form N-
PORT with the Commission. The data content of what funds must report,
either publicly or non-publicly, will not change. In addition, neither
the content nor the timing requirements for publicly available
information on Form N-PORT will change. Therefore, the amendments will
have no effect on the ability of investors and other market
participants to use this information to help them make more informed
investment decisions. Rather, they will only modify the timing of the
Commission's receipt of information for internal purposes.
Additionally, requiring funds to maintain the Form N-PORT data in their
records 30 days after the end of each month will ensure that the
Commission can receive more timely information, when necessary.
This modification will reduce the Commission's cyber risk profile
in several ways. First, extending the fiscal quarter-end filing
deadline from 30 to 60 days allows the quarter-end report on Form N-
PORT to be made public immediately upon filing, with the exception of
the non-public fields described above.\35\ Without this change, the
Commission would need to keep this data non-public for at least a month
after filing. This change therefore significantly reduces the volume of
non-public data maintained in our systems, with no effect on the
information investors and other market participants receive or the
timing of such receipt.\36\ Second, delaying the filing deadline for
[[Page 7983]]
the fund's non-public first and second month reports for each fiscal
quarter on Form N-PORT, to a time when the quarter-end report will be
submitted and made public, significantly reduces the sensitivity of the
non-public data.
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\35\ See supra footnote 32.
\36\ See id. While certain of these items, such as
``miscellaneous securities'' (Part D of the Form), may contain
sensitive, non-public data, this data's sensitivity is also reduced
by the additional delay.
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Registrants can take steps to reduce the risk of any inadvertent
disclosure of non-public Form N-PORT data filed through EDGAR by, for
example, filing the quarter-end report (which is largely public data)
on a separate day from the first two months of the fiscal quarter to
reduce the risk of the fund incorrectly identifying a non-public filing
as public.\37\ In addition, we are modifying the filing schema for Form
N-PORT to require registrants to affirm whether the data in the filing
is non-public (for months 1 and 2) or public (month 3). For example, if
a registrant affirms in the filing that the data is non-public, but
attempts to file report type NPORT-P (which will be made public upon
filing), such a filing will not be accepted by EDGAR.\38\ We believe
that such a change will help ensure that filers do not inadvertently
make the wrong month's data public.
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\37\ As further detailed in the Form N-PORT filing requirements
in the EDGAR Filing Manual, quarter-end filings will be made by
filing two separate reports on the NPORT-NP form type (for the first
two months of the fund's fiscal quarter) and one report on NPORT-P
form type (for the third month of the fund's fiscal quarter). See
EDGAR Filer Manual, v. II, available at https://www.sec.gov/info/edgar/edgarfm-vol2-v49.pdf.
\38\ See id.
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Importantly, we will still receive the monthly Form N-PORT data
necessary to assist us in our role as primary regulator of investment
companies and to better fulfill our mission of protecting investors;
maintaining fair, orderly, and efficient markets; and facilitating
capital formation.\39\ Additionally, the staff will continue to monitor
and solicit feedback on the data received and the use made (or expected
to be made) of such data in furtherance of the Commission's statutory
mission, as well as cybersecurity considerations and other matters
deemed relevant by the staff. In this regard, the staff will inform the
Commission, within one year from the date hereof, what steps, if any,
the staff recommends in light of this monitoring, including but not
limited to whether the filing time frames should be amended.
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\39\ While we acknowledge that requiring funds to file reports
more than 30 days after month end will result in less timely data
being submitted to the Commission, which may reduce the utility of
portfolio information to the Commission, we still believe that it is
necessary for the Commission to receive monthly data points from
funds, albeit with a longer delay. See Adopting Release, supra
footnote 3, at section II.A.3. As we noted in the Adopting Release,
such data will continue to enhance the ability of staff to perform
analyses of funds in the course of monitoring for industry trends,
or identifying issues for examination or inquiry. Id. Moreover, our
experience with large hedge fund adviser reporting on Form PF has
shown us that quarterly reporting of monthly data, with a 60-day
delay in its submission, is useful in providing regulators with data
to identify emerging trends and risks. See Form PF Adopting Release,
supra footnote 19, at section II.B.1.
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The Commission also will continue to receive reports on Form N-
LIQUID, which provides the Commission with more timely information on
certain liquidity events at a fund.\40\ In addition, we understand from
staff outreach that certain funds would like the opportunity, when
appropriate, to provide more information related to their filings on
Form N-LIQUID. For example, when filing reports on Form N-LIQUID, some
funds have requested the ability to include additional narrative
information in their reports that relate to the circumstances
surrounding the liquidity event. Therefore, in order to allow funds the
opportunity to communicate this information voluntarily, we are
amending Form N-LIQUID to provide for a voluntary explanatory notes
section.\41\
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\40\ See Investment Company Liquidity Risk Management Program,
Investment Company Act Release No. 32315 (Oct. 13, 2016) [81 FR
82142 (Nov. 18, 2016)].
\41\ See Part E of Amended Form N-LIQUID.
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As noted above, consistent with the Commission's examination
authority, upon request, funds will promptly provide data that is
required by Form N-PORT and is maintained in their records within 30
days after the end of each month.\42\ The Commission's ability to
collect information in a timely fashion through its examination
authority, and evaluate such information for compliance with the
federal securities laws, is essential to our mission of protecting
investors and our securities markets.\43\ Indeed, the prompt production
of records to the Commission is central to our mission of protecting
investors, and is imperative to an effective and efficient examination
program.\44\ Accordingly, nothing in this release should be construed
as diluting our commitment to enforcing the regulatory requirements
relating to books and records and their production to us.
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\42\ See amended rule 30b1-9; see also supra footnotes 33-34 and
accompanying text.
\43\ See, e.g., 15 U.S.C. 80a-30(b) (section 31(b) of the
Investment Company Act) (providing the Commission with examination
authority); 15 U.S.C. 80b-4 (section 204 of the Investment Advisers
Act) (same); see also rule 31a-1 (Commission books and records
rules); rule 31a-2 (same); 17 CFR 275.204-2 (rule 204-2 under the
Investment Advisers Act) (same).
\44\ See, e.g., Electronic Recordkeeping by Investment Companies
and Investment Advisers, Investment Advisers Act Release No. 1945
(May 24, 2001) [66 FR 29224 (May 30, 2001)] (explaining that the
``continuing accessibility and integrity of fund and adviser records
are critical to the fulfillment of our oversight responsibilities,''
and noting the Commission's expectation that a fund or adviser would
be permitted to delay furnishing electronically stored records for
more than 24 hours only in ``unusual circumstances.'').
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We request comment on our amendments to rule 30b1-9 and Form N-
PORT.
Should we amend rule 30b1-9 and Form N-PORT to require
each monthly report to be filed with the Commission quarterly, rather
than monthly? If not, why not?
Should we amend rule 30b1-9 to require funds no later than
30 days after the end of each month, to maintain in their records the
information that is required to be included in Form N-PORT? Should we
extend the 30-day after month end deadline for retaining monthly data?
If so, why and how long of a period would be appropriate? Are there any
operational difficulties with maintaining such data in a fund's
records?
Should we require funds to maintain such data in an XML
format?
Should we extend the filing deadline for Form N-PORT until
sixty days after quarter end? Does the extension sufficiently reduce
the sensitivity of the data contained in Form N-PORT? If not, why not
and how long of a period would be appropriate? Are there any
operational difficulties with filing three separate reports on Form N-
PORT sixty days after the end of the fiscal quarter?
Should we amend Form N-LIQUID to provide for a voluntary
explanatory notes section?
C. Compliance Dates
As discussed above, the current compliance dates for Form N-PORT
will not change. Funds in larger fund groups that were subject to the
June 1, 2018 compliance date must continue 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.\45\ Additionally, after the April 1, 2019 expiration of the
temporary final rule's retention requirement, funds in larger fund
groups will be required to begin submitting their first reports on
EDGAR (60 days after the end of their fiscal quarter) and will
continue, 30 days after month-end, to maintain in their records the
information that is required to be
[[Page 7984]]
included in Form N-PORT.\46\ Below is a chart that describes the
current compliance dates for reports on Form N-PORT.
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\45\ See rule 30b1-9(T)(a); see also Temporary Final Rule
Release, supra footnote 9.
\46\ As discussed above, the temporary final rule requires
larger fund groups to satisfy their reporting obligations by
maintaining in their records the information required to be included
in Form N-PORT. See amended rule 30b1-9(T). Amended rule 30b1-9,
among other things, makes such a data retention requirement
permanent for all funds, subject to rule 31a-2(a)(2). See supra
footnotes 33-34 and accompanying text. Additionally, smaller fund
groups will continue to be required to submit their first reports on
EDGAR by April 30, 2020. Moreover, after April 1, 2020, smaller fund
groups will also be required to comply with amended rule 30b1-9's
data retention requirement.
------------------------------------------------------------------------
Compliance date for filing
Form N-PORT reports on EDGAR
------------------------------------------------------------------------
Large Fund Groups..................... April 1, 2019.
Smaller Fund Groups................... April 1, 2020.
------------------------------------------------------------------------
Finally, the first six months of reports on Form N-PORT (i.e.,
reports filed with the Commission with monthly data from the quarters
ending March 31, 2019 through August 31, 2019) will continue to be kept
non-public in order to allow funds and the Commission to make
adjustments to fine-tune the technical specifications and data
validation processes.\47\ As before, portfolio information attached as
exhibits to Form N-PORT for the first and third quarters of a fund's
fiscal year (Part F of Form N-PORT) will still be made public during
this period, to ensure that information about funds' portfolio holdings
continues to be publicly available to investors and market participants
during the period when reports on Form N-PORT will not be made publicly
available.\48\
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\47\ See Adopting Release, supra footnote 1, section II.H.1.
\48\ See id.
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However, given the timing considerations relating to this action,
the Commission understands that some funds in larger fund groups, such
as those with fiscal quarters ending in March or April, may not
currently be prepared to file all three months of Form N-PORT reports
at the end of their next fiscal quarter.\49\ In order to give these
larger fund groups adequate time to prepare their reports, the
Commission is exempting funds in larger fund groups with fiscal
quarters ending in March from the requirement to file their reports on
Form N-PORT for the first two months of data with the Commission
(January and February), and funds with fiscal quarters ending in April
from the requirement to file the report for the first month of data
with the Commission (February).\50\ For example, a fund in a larger
fund group with its fiscal quarter ending in April 2019 will only be
required to file reports on Form N-PORT for the fund's second and third
month (March and April 2019), which must be filed with the Commission
60 days from quarter-end.\51\ At the next fiscal quarter end (July
2019), the fund will file reports on Form N-PORT for each month of the
quarter (May, June, and July), 60 days from the end of the quarter.
Again, all such reports, with the exception of the month 3 portfolio
holdings attachment (Part F of Form N-PORT), will not be made public.
Below is a chart that describes the filing dates for larger funds
groups' first reports on Form N-PORT.
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\49\ Neither temporary rule 30b1-9(T) nor amended rule 30b1-9
requires funds to maintain Form N-PORT information in their records
in an XML format. See Temporary Final Rule Release, supra footnote
9, at note 28. Without relief, funds with fiscal quarters ending in
March or April would be required to create XML reports on Form N-
PORT for the months that are covered by the temporary rule which
would effectively require funds to create XML reports on Form N-PORT
earlier than anticipated. Such funds will still be required to
comply with rule 30b1-9's data retention requirements for the
information required to be reported on Form N-PORT. See amended rule
30b1-9.
\50\ For the reasons discussed above, we find that this relief
is necessary or appropriate in the public interest and consistent
with the protection of investors and the purposes fairly intended by
the policy and provisions of the Investment Company Act. See 15
U.S.C. 80a-6(c).
\51\ Because of the 6-month non-public phase in period for Form
N-PORT, this report would not be made public. See supra footnote 47
and accompanying text.
----------------------------------------------------------------------------------------------------------------
First report on Form N-PORT
Fiscal quarter end must be filed on EDGAR by Required monthly data
----------------------------------------------------------------------------------------------------------------
March 31, 2019.......................... May 30, 2019............... March 2019.
April 30, 2019.......................... July 1, 2019 \52\.......... March, April 2019.
May 31, 2019............................ July 30, 2019.............. March, April, May 2019.
----------------------------------------------------------------------------------------------------------------
We request comment on the compliance date for our amendments to
Form N-PORT and rule 30b1-9.
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\52\ Because 60 days after the fund's April 30, 2019 fiscal
quarter end falls on a Saturday (June 29, 2019), the report on Form
N-PORT must be filed with the Commission no later than July 1, 2019
(the next business day). See General Instruction A to Form N-PORT
(``If the due date falls on a weekend or holiday, the filing
deadline will be the next business day.''). In order to make General
Instruction A clearer for registrants, we are moving the due date
instruction to the end of the paragraph. See amended General
Instruction A to Form N-PORT.
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Do the current compliance dates provide adequate time for
funds to prepare their systems for filing reports on Form N-PORT? If
not, why not, and how much more time is needed?
Should we provide relief to funds with fiscal quarters
ending in March and April to allow them only to file reports for the
third month of their quarter end in 2019? Should we extend this relief
to funds with other quarter-ends? Will funds with other quarter ends
have any operational difficulties with modifying their systems to file
each monthly report on Form N-PORT 60 days after the end of their
fiscal quarter?
D. 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.\53\ 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.'' \54\ We have determined to
immediately adopt this modification to the filing requirements for Form
N-PORT and the accompanying changes described above.
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\53\ See 5 U.S.C. 553(b)-(c).
\54\ 5 U.S.C. 553(b)(3)(B).
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As discussed above, based on our recent evaluation of the data
security protocols relating to Form N-PORT, and in light of our
continued assessment of our internal cybersecurity risk profile, we
have re-evaluated whether, in this particular case, we can meaningfully
reduce the sensitivity of the data we will maintain while continuing to
achieve our regulatory objectives. This recent re-evaluation has led us
to determine that modifying the filing requirements for Form N-PORT is
necessary. Additionally, as explained above, the modifications affect
the timeliness of the data for the Commission's analysis but would not
affect the current requirements regarding the content of the data that
is
[[Page 7985]]
made public or when the data is made public. Given the limited nature
of this change, and previous delays in implementation of the rule, we
find that it is appropriate to implement this modification as an
interim final rule. Soliciting public comment on this issue would be
neither necessary, practicable, nor in the public interest.
Independently, providing immediate certainty to funds is critical
because we understand that many funds are currently designing and
testing their systems and procedures in light of the April 1, 2019
expiration of temporary rule 30b1-9(T)'s retention requirement. Funds
need to know as soon as practicable that there will be a modification
in the requirement for filing reports on Form N-PORT through the EDGAR
system, and that as a result they will have to make changes to the
timing of their reports. For example, absent the certainty provided by
a final rule, funds may not be prepared to make all three Form N-PORT
filings at quarter-end, especially in light of the compliance dates for
larger fund groups. Providing notice and comment would defeat this goal
of giving certainty as to funds' obligations in light of the
modifications stemming from the Commission's recent cybersecurity
initiatives.\55\ Under these circumstances, soliciting public notice
and comment would be unnecessary, 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
amendments to rule 30b1-9 and Form N-PORT outlined above.\56\
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\55\ We similarly do not believe that notice and comment on the
amendment to Form N-LIQUID are necessary given the limited and
voluntary nature of the amendment.
\56\ 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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The APA also generally requires that an agency publish an adopted
rule in the Federal Register at least 30 days before it becomes
effective. This requirement does not apply, however, if the agency
finds good cause for making the rule effective sooner.\57\ For the
reasons discussed above, and in order to give registrants immediate
relief from filing reports on Form N-PORT with the Commission each
month, we find good cause to make the rule effective upon publication
in the Federal Register.
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\57\ 5 U.S.C. 553(d)(3).
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II. Economic Analysis
A. Introduction
Our modifications to the timing requirements for filing Form N-PORT
will require funds to file each monthly report on Form N-PORT with the
Commission no later than 60 days after a fund's fiscal quarter end.
Information for the first two months of each fund's fiscal quarter will
continue to be non-public and available for use by the Commission.
Information reported on the quarter-end report on Form N-PORT will be
made public immediately upon filing and thus will continue to be
required to be publicly available with a delay of, at most, 60 days
after the end of the fiscal quarter.\58\ In addition, funds will be
required to maintain in their records the information that is required
to be included on Form N-PORT no later than 30 days after the end of
each month.
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\58\ As discussed above, see supra footnote 32, certain data
fields on the quarter-end report on Form N-PORT will continue to be
masked from the public. See General Instruction F of Form N-PORT.
---------------------------------------------------------------------------
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 the change in the timing of the
EDGAR submission requirement for reports on Form N-PORT and the
associated recordkeeping requirement.
B. Economic Baseline
The reporting and disclosure obligations created by the 2016
adoption of Form N-PORT serve as the baseline against which the costs
and benefits as well as the effects on efficiency, competition, and
capital formation of the modified timing requirements are
discussed.\59\ Additionally, the baseline takes into account the
temporary rule that the Commission adopted on December 8, 2017, which
delayed the initial reporting of Form N-PORT on EDGAR by nine
months.\60\
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\59\ See Adopting Release, supra note 3, section III.
\60\ See Temporary Final Rule Release, supra footnote 9, at note
5.
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Currently, the Commission generally receives portfolio information
from registered management investment companies (other than money
market funds and SBICs) on Form N-Q and Form N-CSR on a quarterly
basis, 60 and 70 days after the end of the quarter, respectively. Once
the temporary final rule expires on June 1, 2019, funds in larger fund
groups would be required to submit reports on Form N-PORT within 30
days after each month-end.\61\ The reports on Form N-PORT for the first
two months of each fund's fiscal quarter would not be made public.
Information reported on the quarter-end report, with the exception of
the items identified in General Instruction F of Form N-PORT, would be
made publicly available with a delay of 60 days after the end of the
fiscal quarter. As a result, the Commission would confidentially
maintain for at least 30 days Form N-PORT information that would
eventually become publicly available.
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\61\ See supra footnotes 11-12 and accompanying text.
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The entities affected by the modified timing of the EDGAR
submission requirement for reports on Form N-PORT are the funds that
will report using this form and their investors. As of the end of 2017,
approximately 101.9 million individuals owned shares of registered
investment companies, representing 57.3 million or 45.4% of U.S.
households.\62\ As of September 2018, we estimate that there were
11,619 funds required to file Form N-PORT (i.e., 8,976 mutual funds
(excluding money market funds), 1,939 ETFs (including 8 ETFs organized
as UITs and 1,931 ETFs that are management investment companies), and
704 closed-end funds (excluding SBICs)).\63\
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\62\ 2018 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/2018_factbook.pdf.
\63\ Counts of mutual funds and ETFs are based on data from the
ICI and the count of closed-end funds is based on registrants'
filings with the Commission on Forms N-SAR and N-Q and data from
Morningstar Direct as of September 2018.
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C. Benefits and Costs of the Modified Timing Requirement for Filing
Form N-PORT
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, the adoption
of Form N-PORT will modernize fund reporting, improve the ability of
the Commission to fulfill its regulatory
[[Page 7986]]
functions, and allow investors to make more informed investment
decisions.\64\
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\64\ See Adopting Release, supra footnote 3, at section II.A.
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The data that the Commission will receive on Form N-PORT is
sensitive and includes portfolio information for the first two months
of a fund's fiscal quarter that is designated non-public, information
for the third month of a fund's fiscal quarter before its scheduled
publication, and information for the third month of a fund's fiscal
quarter from non-public fields. The data at risk could, for example,
harm fund shareholders by expanding the opportunities for professional
traders and others to exploit this information.\65\ In addition, an
unauthorized intrusion could affect the Commission's future ability to
collect the data necessary to support its mission.
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\65\ The academic literature has argued that certain trading
strategies by outside investors that make use of a fund's timely
portfolio information, including trading ahead of a fund and
mimicking a fund's holdings, can be costly for funds and their
investors, particularly for funds that execute large orders or
employ proprietary trading strategies. (See, e.g., ICI, The
Potential Effects of More Frequent Portfolio Disclosure on Mutual
Fund Performance, Perspective Vol. 7, No. 3 (June 2001) and Vikas
Agarwal, et al., Mandatory Portfolio Disclosure, Stock Liquidity,
and Mutual Fund Performance, The Journal of Finance, Vol. 70, No. 6
(Dec. 2015)). In addition, the academic literature has studied the
economic effects of cybersecurity risk in various settings. For
example, one paper (See Campbell, Katherine, et. al., The economic
cost of publicly announced information security breaches: empirical
evidence form the stock market, Journal of Computer Security 11
(2003)) finds evidence suggesting that a firm's stocks price tends
to decrease upon the announcement that an information security
breach involving unauthorized access to confidential data has
happened at the firm. However, we are not aware of any studies that
would allow us to quantify the economic costs of a cybersecurity
breach that revealed a fund's confidential portfolio information.
---------------------------------------------------------------------------
We believe that increasing the delay in when funds must submit
reports on Form N-PORT will reduce the value of non-public data
maintained by the Commission. Reducing the value of this data may both
reduce a potential motivation for cyberattacks and mitigate potential
costs to funds and their investors in the event a fund's non-public
data is exposed. First, the extension of the fiscal quarter-end filing
deadline from 30 to 60 days allows the data in the quarter-end report
on Form N-PORT to be public immediately upon filing, with the exception
of the non-public fields described above.\66\ As a result, the
Commission will no longer have to keep this data non-public for at
least a month after filing, thereby reducing the volume of non-public
data maintained in our systems and the associated cybersecurity risks.
Second, under the modified timing of the EDGAR filing requirement for
reports on Form N-PORT, a fund's submission for the first and second
months of a fund's fiscal quarter will be delayed until the time that
the submission for the quarter-end report is filed and made public. We
believe that these changes to the timing requirements for filing Form
N-PORT will reduce the sensitivity of the data the Commission stores
and maintains.
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\66\ See supra footnote 32.
---------------------------------------------------------------------------
The portion of the Form N-PORT data that will be made publicly
available and the timing of the public availability will not change. As
a result, the benefits of the disclosure to public users of the data
would remain unchanged from the baseline. These benefits include, for
example, an increase in the transparency of a fund's investment
strategies and an increase in the ability of investors to identify more
efficiently the funds' risk exposures, differentiate investment
companies based on their investment strategies, and make more informed
investment decisions associated with the public availability of this
data.
Increasing the Form N-PORT filing delay and requiring funds to
maintain in their records the information that is required to be
included on Form N-PORT no later than 30 days after the end of each
month likely will not meaningfully change the costs for submitting the
form and keeping records borne by fund groups, as the timing of
collecting the information, the amount of information to be submitted,
and the number of forms to complete is identical to the baseline.\67\
In addition, the current compliance dates for Form N-PORT will not
change.\68\ In light of our ongoing assessment of our internal
cybersecurity risk profile, we have re-evaluated whether, in this
particular case, we can meaningfully reduce the sensitivity of the data
we will maintain while continuing to achieve our regulatory objectives.
On the one hand, the modifications in the EDGAR submission requirement
will delay the filings of Form N-PORT data with the Commission in the
ordinary course. Compared to the baseline, the data for monthly filings
will be less current, by an average of 60 days. The delay will reduce
the data's utility to the Commission for analyses of funds in the
course of monitoring for industry trends and identifying issues for
examination or inquiry. The impact of the delay on the Commission's
analytical capabilities will vary across applications, and for certain
applications, the impact of greater data staleness would decrease over
time as the Commission builds up historical data. For example,
historical trends inferred from a long time series of data would, in
many cases, not be significantly affected by the delay in filing of
monthly information. Moreover, requiring funds to maintain the Form N-
PORT data in their records 30 days after the end of each month will
ensure that the Commission can receive more timely information when
necessary.\69\
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\67\ To the extent that it is more efficient for fund groups to
submit all three monthly filings of Form N-PORT in one batch at
quarter-end, rather than individually every month, the costs borne
by fund groups may be marginally reduced under this increased delay.
\68\ As discussed above, funds in larger fund groups with fiscal
quarters ending in March, 2019, which may not be prepared to make
initial filings of all three months of Form N-PORT reports on a
single date, will only be required to file reports on Form N-PORT
for the last month of that fiscal quarter. Larger fund groups with
fiscal quarters ending in April, 2019, will only be required to file
reports on Form N-PORT for the last two months of that fiscal
quarter.
\69\ In addition, the Commission will continue to receive
reports on Form N-LIQUID, which provides us with more timely
information on certain liquidity events at a fund. In order to allow
funds the opportunity to communicate this information, we are
amending Form N-LIQUID to provide for a voluntary explanatory notes
section. See Part E of Amended Form N-LIQUID.
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D. Effects on Efficiency, Competition, and Capital Formation
The modification in the timing of the EDGAR submission requirements
will--without materially affecting our ability to obtain data when we
need it--reduce the risk of cybersecurity threats and thereby decrease
the likelihood that exposure of sensitive data could hamper the
Commission's future ability to collect the data necessary to support
its mission. As a result, we believe that the modification will help
the Commission maintain efficient capital markets through appropriate
supervision and regulation.
A reduction in cybersecurity risk will also reduce the likelihood
of related adverse impacts on an affected fund and its investors, as
discussed above. To the extent that investors anticipate the potential
impacts of cybersecurity risks, a reduction in this risk could increase
the amount invested in funds. If this additional investment in funds
does not represent substitution away from other forms of capital
formation, such as direct investments in operating companies, the
reduction in risk could thereby improve capital formation. We believe,
however, that any such effect would likely be small.
Similarly, we believe that the modification would not have any
significant competitive effects, as the delay affects all filers of
Form N-PORT uniformly.
[[Page 7987]]
E. Alternatives
As an alternative to requiring monthly portfolio reporting (filed
on a quarterly basis), the Commission considered requiring quarterly
portfolio reporting. Under the alternative, the Commission would no
longer receive non-public data for monthly portfolio reports related to
the first two months in a fund's fiscal quarter, thereby reducing the
amount of non-public information the Commission stores and maintains
and further reducing the risk of cybersecurity risks. In addition, the
alternative would likely reduce the costs for funds to file Form N-
PORT. However, the alternative would eliminate the additional
information in the monthly portfolio reporting that will allow the
Commission to analyze the evolution of portfolio holdings and the
fluctuations in the values of portfolio investments within a fund's
fiscal quarter. We continue to believe that the higher frequency of
monthly portfolio reporting will be useful to the staff to perform
analyses of funds in the course of monitoring for industry trends or
identifying issues for examination or inquiry, even if the Commission
receives this information on a more delayed basis in the ordinary
course.\70\ Our modifications to the timing of filings and not the
frequency of data reflect our belief that the greater usefulness to the
Commission of monthly portfolio reporting on a quarterly basis
justifies any attendant risk and larger costs for funds to report
monthly rather than quarterly portfolio information.
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\70\ Our experience with large hedge fund adviser reporting on
Form PF has shown us that quarterly reporting of monthly data, with
a 60-day delay in its submission, is useful in providing regulators
with data to identify emerging trends and risks. See supra footnote
39.
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As an alternative to requiring funds to file all three monthly
Forms N-PORT within 60 days of a fund's fiscal quarter end, we
considered requiring funds to submit Form N-PORT within 60 days of the
end of each month. While this alternative would increase the delay in
when funds would be required to submit Forms N-PORT for all three
months of a fund's fiscal quarter compared to the baseline, the delay
would be shorter compared to the modified timing requirement we are
adopting today for the first two months of a fund's fiscal quarter. As
a result, the decrease in the sensitivity of the data the Commission
stores and maintains and the resulting reduction in cybersecurity risk
would be smaller under this alternative. We acknowledge the shorter
delay in the Commission's receipt of data for the first two months
under this alternative would have a smaller impact on the Commission's
analytical capabilities than the modification to filing that we are
adopting. However, as discussed above in section II.C, we expect this
impact to (i) vary across applications and (ii) be attenuated by the
requirement that funds maintain the Form N-PORT data in their records
30 days after the end of each month, which will ensure that the
Commission can receive more timely information, when necessary.
III. Paperwork Reduction Act
The Commission is modifying the requirement for reports on Form N-
PORT to require all three monthly Form N-PORT reports for a particular
fiscal quarter be filed with the Commission 60 days after the end of
that quarter. Amended rule 30b1-9 will also require funds to maintain
in their records the information that is required to be included on
Form N-PORT no later than 30 days after the end of each month.\71\ We
do not believe that 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'').\72\ While the reporting dates for Form N-PORT will change,
the number of Form N-PORT filings, timing of collecting the data, and
other related burdens will remain the same. As a result, the Commission
believes that the current PRA burden estimates for the existing
collection of information requirements remain appropriate.\73\
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\71\ We previously noted 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. See
Temporary Final Rule Release, supra footnote 9, at section III.A.
\72\ 44 U.S.C. 3501 through 3521.
\73\ ``Form N-PORT Under the Investment Company Act, Monthly
Portfolio Investments Report'' (OMB Control No. 3235-0730). We
similarly do not believe that our change to Form N-LIQUID will make
any substantive modifications to the existing collection of
information requirements within the meaning of the PRA. See ``Form
N-LIQUID Under the Investment Company Act, Current Report, Open-End
Investment Company Liquidity'' (OMB Control No. 3235-0754).
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IV. Statutory Authority
We are adopting amendments to the rule 30b1-9, Form N-PORT, and
Form N-LIQUID under the authority set forth in the Investment Company
Act, particularly sections 6(c), 8, 30, 31, and 38 thereof [15 U.S.C.
80a et seq.], and 44 U.S.C. 3506.
List of Subjects in 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 is revised to read as follows:
Sec. 270.30b1-9 Monthly report.
Each registered management investment company or exchange-traded
fund organized as a unit investment trust, or series thereof, other
than a registered open-end management investment company that is
regulated as a money market fund under Sec. 270.2a-7 or a small
business investment company registered on Form N-5 (Sec. Sec. 239.24
and 274.5 of this chapter), must file a monthly report of portfolio
holdings on Form N-PORT (Sec. 274.150 of this chapter), current as of
the last business day, or last calendar day, of the month. A registered
investment company that has filed a registration statement with the
Commission registering its securities for the first time under the
Securities Act of 1933 is relieved of this reporting obligation with
respect to any reporting period or portion thereof prior to the date on
which that registration statement becomes effective or is withdrawn.
Each registered investment company that is required to file reports on
Form N-PORT must maintain in its records the information that is
required to be included on Form N-PORT no later than 30 days after the
end of each month. Such information 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. Reports on Form N-PORT for each month in each
fiscal quarter of a registered investment company must be filed with
the Commission no later than 60 days after the end of such fiscal
quarter.
[[Page 7988]]
PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940
0
3. The general authority citation for part 274 continues to read as
follows:
Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and Pub. L. 111-203,
sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.
* * * * *
0
4. Section 274.150 is revised to read as follows:
Sec. 274.150 Form N-PORT, Monthly portfolio holdings report.
(a) Except as provided in paragraph (b) of this section, this form
shall be used by registered management investment companies or
exchange-traded funds organized as unit investment trusts, or series
thereof, to file reports pursuant to Sec. 270.30b1-9 of this chapter
not later than 60 days after the end of each fiscal quarter.
(b) Form N-PORT shall not be filed by a registered open-end
management investment company that is regulated as a money market fund
under Sec. 270.2a-7 of this chapter or a small business investment
company registered on Form N-5 (Sec. Sec. 239.24 and 274.5 of this
chapter), or series thereof.
Note: The text of Form N-PORT will not appear in the Code of
Federal Regulations.
0
5. Form N-PORT (referenced in Sec. 274.150) is amended as follows:
Note: The text of Form N-PORT does not, and these amendments
will not, appear in the Code of Federal Regulations.
FORM N-PORT
MONTHLY PORTFOLIO INVESTMENTS REPORT
Form N-PORT is to be used by a registered management investment
company, or an exchange-traded fund organized as a unit investment
trust, or series thereof (``Fund''), other than a Fund that is
regulated as a money market fund (``money market fund'') under rule
2a[dash]7 under the Investment Company Act of 1940 [15 U.S.C. 80a]
(``Act'') (17 CFR 270.2a[dash]7) or a small business investment company
(``SBIC'') registered on Form N-5 (17 CFR 239.24 and 274.5), to file
reports of monthly portfolio holdings pursuant to rule 30b1-9 under the
Act (17 CFR 270.30b1-9). The Commission may use the information
provided on Form N[dash]PORT in its regulatory, enforcement,
examination, disclosure review, inspection, and policymaking roles.
GENERAL INSTRUCTIONS
A. Rule as to Use of Form N-PORT
Form N-PORT is the reporting form that is to be used for monthly
reports of Funds other than money market funds and SBICs under section
30(b) of the Act, as required by rule 30b1-9 under the Act (17 CFR
270.30b1-9). Funds must report information quarterly about their
portfolios and each of their portfolio holdings as of the last business
day, or last calendar day, of each month. A registered investment
company that has filed a registration statement with the Commission
registering its securities for the first time under the Securities Act
of 1933 is relieved of this reporting obligation with respect to any
reporting period or portion thereof prior to the date on which that
registration statement becomes effective or is withdrawn.
Reports on Form N-PORT must disclose portfolio information as
calculated by the fund for the reporting period's ending net asset
value (commonly, and as permitted by rule 2a-4, the first business day
following the trade date). A Fund must maintain in its records the
information that is required to be included on Form N-PORT no later
than 30 days after the end of each month. Such information shall be
treated as a record under section 31(a)(1) of the Act and rule 31a-1(b)
thereunder subject to the requirements of rule 31a-2(a)(2). Reports on
Form N-PORT for each month in each fiscal quarter of a fund must be
filed with the Commission no later than 60 days after the end of such
fiscal quarter. If the due date falls on a weekend or holiday, the
filing deadline will be the next business day.
A Fund may file an amendment to a previously filed report at any
time, including an amendment to correct a mistake or error in a
previously filed report. A Fund that files an amendment to a previously
filed report must provide information in response to all items of Form
N-PORT, regardless of why the amendment is filed.
* * * * *
0
6. Form N-LIQUID (referenced in Sec. 274.223) is amended as follows:
Note: The text of Form N-LIQUID does not, and these amendments
will not, appear in the Code of Federal Regulations.
FORM N-LIQUID
CURRENT REPORT
OPEN END MANAGEMENT INVESTMENT COMPANY LIQUIDITY
* * * * *
PART E. Explanatory Notes (if any)
Registrants may provide any information it believes would be
helpful in understanding the information reported in response to any
Item of this Form.
* * * * *
By the Commission.
Dated: February 27, 2019.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03958 Filed 3-5-19; 8:45 am]
BILLING CODE 8011-01-P
