In May of 2015, the Investment Company Reporting Modernization rule was proposed by the SEC, introducing forms N-PORT and N-CEN. Since then, in an effort to ease the transition for filers, there have been some changes to the original proposal and delays to the implementation schedule of the forms. This is the first year that all relevant filers must be in compliance with the new rules, and it’s important to understand what that means for your company. These new forms report detailed information on mutual funds, exchange traded funds (ETFs), and other registered investment companies (RICs); however, money market funds are not included. Form N-PORT and Form N-CEN replace the previous reports providing similar functions, Form N-Q and Form N-SAR, respectively. The new reports serve different purposes, and in this blog we will go over some of the details and intricacies of Form N-PORT specifically.
Reporting on Fund Portfolios
Eponymously, Form N-PORT gives an in-depth overview of a fund’s portfolio. Filers are required to compile series level data on their funds’ holdings at the end of each month. Funds with multiple series will have to file separate reports for each series. Risk metrics, terms of derivative contracts, liquidity information, assets and liabilities, and detailed lending information are among the many fields covered within the Form. In calculating these fields, funds may use their own internal methodologies as long as the methods are applied consistently, and the information reported matches what is provided internally and to investors. Amendments to previously filed Form N-PORT submissions can be filed at any time. Large fund groups are already required to be in compliance with the new rules, and smaller fund groups must file their first N-PORT report no later than June 1, 2020, with data retention requirements going into effect on April 1, 2020.
Differences from Form N-Q
The three biggest changes from Form N-Q rules that Form N-PORT introduces are the schedule of data collection and filing, the format in which this information is reported, and the amount of information provided.
- Schedule: Registrants will now have to collect relevant information on a monthly basis. Monthly data must be available upon request of the Office of Management and Budget within 30 days of the end of each month, and three Form N-PORTs must be filed within 60 days of the end of each quarter. These three submissions will cover the three months within that quarter, and only the N-PORT report for the last month of the quarter will be made public 60 days after filing. Non-public N-PORT reports are used for oversight and regulatory purposes. This is a significant change from the N-Q/N-SAR schedule, which only required information to be collected and filed on a quarterly basis.
- Format: In an effort to modernize the reporting process, N-PORT reports are to be submitted in XML format. The switch from HTML format to XML makes it easier for both regulators and the public to collect and analyze data. Once submitted, a human readable version of the XML file is automatically produced. While this change may in the long run make data collection and reporting easier, it does introduce a technical issue if filers do not currently have access to a software solution necessary for creating XML files, such as Transform™.
- Information: The adoption of Form N-PORT expands the scope of holdings reported to include many not previously required under Form N-Q and increases the detail of information disclosed for most holdings. With Form N-PORT, virtually all of a fund’s holdings are reported, and in some cases (like derivatives), the holdings of those holdings. Forms can and often do run hundreds of pages long, and since each series must file its own form there is often repeating information across filings. As of December of 2019, liquidity information must also be included in Form N-PORT.
These changes are sure to improve oversight and allow investors to make more informed decisions; however, this does impose new costs on filers, who will have to deal with a significant increase in their regulatory burden. With the deadline for small fund groups approaching, it’s important to make sure you’re ready. If you would like to hear about how Transform™ can assist your company with Form N-PORT or any other SEC filing requirements, contact us to see how we can help.
