ICI has 'serious concerns' about SEC reporting requirements

The Securities and Exchange Commission announced Wednesday that it has adopted amendments to reporting requirements which it says will provide more timely information about certain registered investment companies.

But there could be negative impacts according to the Investment Companies Institute.

Requirements to file Form N-PORT - which includes information about a fund’s portfolio holdings and related information to help assess a fund’s risks – on a monthly rather than quarterly basis will apply mostly to registered open-end funds, registered closed-end funds, and ETFs organized as unit investment trusts.

The SEC said that the change will “promote more effective regulatory monitoring and oversight of the fund industry for the benefit of fund investors.”

“Reliable, accessible data benefits everyone,” said SEC Chair Gary Gensler. “These amendments will benefit investors through greater transparency of funds’ investment portfolios and improve the Commission’s oversight of the asset management industry.”

However, ICI president and CEO Eric Pan responded to the news, highlighting that the Institute has raised “serious concerns” about moving portfolio holdings disclosure on Form N-PORT from quarterly to monthly.

“This will open fund managers to a greater risk of predatory trading that will harm fund shareholders, without any corresponding benefit,” he warned. “ICI has also questioned the SEC’s requirement to have funds file these holdings within 30 days of month end given the volume of information required and the SEC’s history of data security breaches.  Additionally, the Commission continues to give little consideration to the disproportionate burden of its rulemaking on smaller fund complexes. The SEC should have reproposed the new reporting requirements to ensure adequate public comment on these concerns.”

The SEC also announced that it has adopted reporting amendments related to open-end fund liquidity risk management program requirements.

This will require open-end funds “to report certain information about service providers used to fulfill liquidity risk management program requirements so that the Commission can track certain liquidity risk management practices,” the SEC said.  

“We also will review today’s new liquidity risk management program guidance to understand how it will impact funds and their shareholders,” the ICI’s Pan responded. “It is important to note that funds currently have robust liquidity risk management programs as a matter of practice and existing regulatory requirements.”

However, Wednesday’s meeting did bring some good news for mutual funds, the scrapping of a swing pricing plan that would have forced many mutual funds to overhaul their pricing models.