Rule 30b1-7 and Form N-MFP
Section 30(b) of the Investment Company Act of 1940 [15 U.S.C. 80a-30(b)] (“Act”) provides that “[e]very registered investment company shall file with the Commission…such information, documents, and reports (other than financial statements), as the Commission may require to keep reasonably current the information and documents contained in the registration statement of such company….” Rule 30b1-7 under the Act [17 CFR 270.30b1-7], entitled “Monthly Report for Money Market Funds,” provides that every registered investment company, or series thereof, that is regulated as a money market fund under rule 2a-7 [17 CFR 270.2a-7] must file with the Commission a monthly report of portfolio holdings on Form N-MFP [17 CFR 274.201] no later than the fifth business day of each month. Form N-MFP sets forth the specific disclosure items that money market funds must provide. Filers must submit this report electronically using the Commission’s electronic filing system (“EDGAR”) in eXtensible Markup Language (“XML”) format.
Form N‑MFP requires money market funds to report certain information that is relevant to an evaluation of the risk characteristics of the fund and its portfolio holdings. Specifically, the form requires funds to disclose, with respect to each portfolio security held on the last business day of the prior month, among other things: (i) name of the issuer; (ii) the title of the issue, including the coupon or yield; (iii) the CUSIP number; (iv) the category of investment (e.g., Treasury debt, government agency debt, asset backed commercial paper, structured investment vehicle notes, etc.); (v) NRSROs designated by the fund, the credit ratings given by each NRSRO, and whether each security is first tier, second tier, unrated, or no longer eligible; (vi) the maturity date as determined under rule 2a‑7, taking into account the maturity shortening provisions of rule 2a‑7(d); (vii) the principal amount; (viii) the current amortized cost value; (ix) whether the instrument has certain enhancement features; (x) whether the security is an illiquid security (as defined in rule 2a‑7); and (xi) the market-based value of each security. In addition, the form requires funds to disclose information about the fund itself, such as the fund’s dollar weighted average maturity of its portfolio and its 7-day gross yield. The rule improves transparency of information about money market funds’ portfolio holdings and facilitates oversight of money market funds. Compliance with rule 30b1-7 is mandatory for any fund that holds itself out as a money market fund in reliance on rule 2a‑7. Responses to the disclosure requirements will not be kept confidential.
On July 23, 2014, the Commission adopted amendments to rule 30b1-7 and Form N-MFP under the Act. Under the reforms, all money market funds whose weekly liquid assets fall below 30% of total assets will have the ability to impose a liquidity fee of up to 2%, or to suspend redemptions temporarily (i.e., “gate” the fund) for up to 10 calendar days in a 90-day period, provided the fund’s board of directors (including a majority of its independent directors) determines that imposing a fee or gate is in the fund’s best interest. All non-government money market funds will be required to impose a fee of 1% on all redemptions if weekly liquid assets fall below 10% of its total assets, unless the board of directors (including a majority of its independent directors) determines that imposing such a fee would not be in the fund’s best interest. In addition, all institutional prime money markets will be required to sell and redeem shares based on the current market-based value of the securities in their underlying portfolios, rounded to four decimal places (e.g., $1.0000), i.e., transact at a floating NAV. Finally, the amendments require that money market funds adopt other amendments designed to make money market funds more resilient, including increasing diversification of their portfolios, enhancing their stress testing, and improving transparency through enhanced disclosure.
The amendments to Form N-MFP will make structural changes (e.g., renumbering Form N-MFP into four separate sections), delete or modify items related to amortized cost and shadow prices that will no longer be relevant under our amendments, add new reporting requirements designed to improve the Commission’s and others ability to monitor money market funds (e.g., level measurements for security valuations, shareholder flow, and amounts of daily and weekly liquid assets) and clarify current instructions and other items in Form N-MFP.
Certain provisions of the rule and form contain “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 [44 U.S.C. 3501, et seq.], and the Commission is submitting the collection of information to the Office of Management and Budget (“OMB”) for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. The information collection requirements of rule 30b1‑7 and reports on Form N-MFP are designed to assist the Commission in analyzing the portfolio holdings of money market funds, and thereby augment our understanding of the risk characteristics of individual money market funds and money market funds as a group and industry trends. This information collection enhances our oversight of money market funds and our ability to respond to market events. In addition, although the portfolio reports to the Commission are not primarily designed for individual investors, the information will be available to the public. Academic researchers, financial analysts and economic research firms may use this information to study money market fund holdings and evaluate their risk information, and their analyses may further help investors and regulators better understand risks in money market funds.
The Commission's Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) is designed to automate the filing, processing and dissemination of full disclosure filings. The system permits publicly-held companies to transmit their filings to the Commission electronically. EDGAR has increased the speed, accuracy and availability of information, generating benefits to investors and financial markets. All funds have been required to use EDGAR for their disclosure filings since November 6, 1995. In addition, the XML-tagged format facilitates efficient and expeditious analysis of portfolio holdings information by the Commission and other interested persons.
The information provided under rule 30b1‑7 and reports on Form N‑MFP may duplicate some information included in other filings with the Commission and/or information required to be disclosed on fund websites. Unlike other filings, however, reports on Form N-MFP must be filed in XML-tagged format, which facilitates staff analysis of portfolio holdings information and enhances Commission oversight of money market funds.
The current disclosure requirements for reports filed on Form N-MFP do not distinguish between small entities and other funds. The burden on smaller funds, however, to prepare and file the report may be greater than for larger funds. This burden includes the cost of producing and filing the reports. The Commission believes, however, that imposing different requirements on smaller money market funds would not be consistent with investor protection. The Commission reviews all rules periodically, as required by the Regulatory Flexibility Act, to identify methods to minimize recordkeeping or reporting requirements affecting small businesses.
With respect to the final amendments, pursuant to 5 U.S.C. section 605(b), the Commission certified that the amendments to rule 30b-7 and Form N-MFP will not have a significant impact on a substantial number of small entities.
Rule 30b1‑7 provides that money market funds must file a report on Form N-MFP each month. Given the rapidly changing composition of money market fund portfolios, which consist of only short-term securities, we believe that less frequent collections would render the portfolio information less timely and relevant.
Rule 30b1-7 requires funds to submit reports on Form N-MFP on a monthly basis. Given the rapidly changing composition of money market fund portfolios, monthly reports are necessary to ensure that the Commission receives more timely and accurate portfolio holdings information.
The Commission and the staff of the Division of Investment Management participate in an ongoing dialogue with representatives of the investment company industry through public conferences, meetings and informal exchanges. These various forums provide the Commission and the staff with a means of ascertaining and acting upon paperwork burdens confronting the industry. The Commission requested public comment on the collection requirements in rule 30b1-7 and Form N-MFP before it submitted this request for revision and approval to the Office of Management and Budget. The Commission received no comments in response to its request.
Not applicable.
Information received pursuant to this collection of information will be kept private to the extent permitted by law.
Form N-MFP collects information that is relevant to an evaluation of the risk characteristics of the fund and its portfolio holdings. The form does not request Social Security Numbers. A System of Records Notice has been published in the Federal Register and can also be found at http://www.sec.gov/about/privacy/sorn/secsorn6.pdf.
In our most recent Paperwork Reduction Act submission for rule 30b1-7, the Commission estimated that the annual compliance burden to comply with the collection of information requirement of rule 30b1-7, and Form N-MFP, is 45,214 hours. The final amendments to rule 30b1-7 will affect the Commission’s estimates of the hour burden as described below.
The Commission understands that approximately 35% of the 5591 (for a total of 1962) money market funds that report information on Form N-MFP license a software solution from a third party that is used to assist the funds to prepare and file the required information. The Commission also understands that approximately 65% of the 5593 (for a total of 363) money market funds that report information on Form N-MFP retain the services of a third party to provide data aggregation and validation services as part of the preparation and filing of reports on Form N-MFP on behalf of the fund. The Commission estimates that, in the first year, each fund (regardless of whether the fund licenses the software or uses a third-party service provider) will incur an additional average annual burden of 85 hours, at a time cost of $22,069 per fund,4 to prepare and file the report on Form N-MFP, and an average of approximately 60 additional burden hours (five hours per fund, per filing), at a time cost of $15,569 per fund5 each year thereafter.
The Commission therefore estimates that our amendments to Form N-MFP will result in a first-year aggregate additional 47,515 burden hours6 at a total time cost of $12,336,5717 for all funds, and 33,540 burden hours8 at a total time cost of $8,703,0719 for all funds each year thereafter. Amortizing these additional hourly burdens over three years results in an average annual aggregate burden of approximately 38,198 hours at a total time cost of $9,914,238 for all funds.10 Finally, the Commission estimates that our amendments to Form N-MFP will result in a total aggregate annual collection of information burden of 83,412 hours.11
In addition to the costs associated with the hour burdens discussed in Item 12 above, money market funds incur other external costs. In our most recent Paperwork Reduction Act submission for rule 30b1-7, the Commission estimated the annual cost burden to comply with the collection of information requirement of rule 30b1-7 (and Form N-MFP) is $4,424,480. The final amendments to rule 30b1-7 will affect the Commission’s estimates of the cost burden as described below.
The Commission understands that software service providers (whether provided by a licensor or third-party service provider) are likely to incur additional external costs to modify their software and may pass those costs down to money market funds in the form of higher annual licensing fees. Although we do not have the information necessary to provide a point estimate of the external costs or the extent to which the software service providers will pass down any external costs to funds, we can estimate a range of costs, from 5% to 10% of current annual licensing fees. Accordingly, the Commission estimates that 35% of funds (196 funds) will pay $336 in additional external licensing costs each year and 65% of funds (363 funds) will pay $800 in additional external licensing costs each year because of our amendments.12 The Commission therefore estimates that our amendments to Form N-MFP will result in an aggregate additional $356,256 in total external costs for all funds in the first year and each year hereafter.13 Finally, the Commission estimates that our amendments to Form N-MFP will result in a total aggregate annual collection of information cost burden of $4,780,736.14
The annual cost of reviewing and processing registration statements, post-effective amendments, proxy statements, shareholder reports, and other filings of investment companies amounted to approximately $18.6 million in fiscal year 2013, based on the Commission’s computation of the value of staff time devoted to this activity and related overhead. A portion of those costs relate to processing and reviewing Form N-MFP filings submitted to the Commission for compliance with rule 30b1-7.
The total annual hour burden of 83,412 hours represents an increase of 38,198 hours over the previous burden hour estimate of 45,214 hours. In addition, the annual external cost burden of $4,780,736 represents an increase of $356,256 over the previous annual external cost burden estimate of $4,424,480. The changes in burden hours and external cost burdens are due to the Commission’s estimates of the time costs and external costs that will result from our amendments.
Not applicable.
We request authorization to omit the expiration date on the electronic version of the form. Including the expiration date on the electronic version of the form will result in increased costs, because the need to make changes to the form may not follow the application’s scheduled version release dates. The OMB control number will be displayed.
Not applicable.
Not applicable.
1 This estimate is based on staff review of reports on Form N-MFP filed with the Commission for the month ended February 28, 2014.
2 The Commission estimated this 35% in the current burden. This estimate is based on the following calculation: 559 funds x 35% = 196 funds.
3 The Commission estimated this 65% in the current burden. This estimate is based on the following calculation: 559 funds x 65% = 363 funds.
4 This estimate is based on the following calculations: [30 hours for the initial monthly filing at a total cost of $7,824 per fund (8 hours x $232 blended average hourly rate for a financial reporting manager ($266) and fund senior accountant ($198) = $1,856) + (4 hours x $157 for an intermediate accountant = $628) + (6 hours x $312 for a senior database administrator = $1872) + (4 hours x $301 for a senior portfolio manager = $1204) + (8 hours x $283 for a compliance manager = $2,264)] + [55 hours (5 hours per fund x 11 monthly filings) at a total cost of $14,245 per fund ($259 average cost per fund per burden hour x 55 hours)]. The additional average annual burden per fund for the first year is 85 hours (30 hours (initial monthly filing) + 55 hours (remaining 11 monthly filings)) and the additional average cost burden per fund for the first year is $22,069 ($7,824 (initial monthly filing) + $14,245 (remaining 11 monthly filings = $22,069). Estimated wage figures are based on published rates taken from SIFMA’s Management & Professional Earnings in the Securities Industry 2013, available at http://www.sifma.org/research/item.aspx?id=8589940603, modified by Commission staff to account for an 1800‑hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead.
5 This estimate is based on the following calculations: (16 hours x $232 blended average hourly rate for a financial reporting manager ($266) and fund senior accountant ($198) = $3,712) + (9 hours x $157 for an intermediate accountant = $1,413) + (13 hours x $312 for a senior database administrator = $4,056) + (9 hours x $301 for a senior portfolio manager = $2,709) + (13 hours x $283 for a compliance manager = $3,679) = 60 hours (16 + 9 + 13 + 9 + 13) at a total cost of $15,569 per fund ($3,712 + $1,413 + $4,056 + $2,709 + $3,679). Therefore, the additional average cost per fund per burden hour is approximately $259 ($15,569 /60 burden hours).
6 This estimate is based on the following calculation: 559 funds x 85 hours = 47,515 burden hours in year 1.
7 This estimate is based on the following calculation: 559 funds x $22,069 in year 1= $12,336,571.
8 This estimate is based on the following calculation: 559 funds x 60 hours per fund = 33,540 hours in subsequent years.
9 This estimate is based on the following calculation: 559 funds x $15,569 in subsequent years = $8,703,071.
10 This estimate is based on the following calculation: (47,515 hours in year 1 + 33,540 hours in year 2 + 33,540 hours in year 3) ÷ 3 = 38,198 average annual burden hours; ($12,336,571 in year 1 + $8,703,071 in year 2 + $8,703,071 in year 3) ÷ 3 = $9,914,238 average annual burden costs.
11 This estimate is based on the following calculation: current approved burden of 45,214 hours + 38,198 in additional burden hours as a result of our amendments = 83,412 hours.
12 The Commission estimates that the annual licensing fee for 35% of money market funds is $3,360: a 5% to 10% increase = $168 - $336 in increased costs; the Commission estimates that the annual licensing fee for 65% of money market funds is $8,000: a 5% to 10% increase = $400 - $800 in increased costs.
13 This estimate is based on the following calculation: (196 funds x $336 additional external costs = $65,856) + (363 funds x $800 additional external costs = $290,400) = $356,256.
14 This estimate is based on the following calculation: current approved burden of $4,424,480 in external costs + $356,256 in additional external costs as a result of our amendments = $4,780,736.
| File Type | application/vnd.openxmlformats-officedocument.wordprocessingml.document |
| File Title | SUPPORTING STATEMENT |
| File Modified | 0000-00-00 |
| File Created | 2021-01-27 |