Form N-PORT Supporting Statement

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission for
Rule 30b1-9 and Form N-PORT
A.

JUSTIFICATION
1.

Necessity for the Information Collection

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…” Proposed
rule 30b1-9 under the Act [17 CFR 270.30b1-9], entitled “Monthly Report,” provides that
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 rule 2a-7 [17 CFR

270.2a-7] or a small business investment company registered on Form N-5 [17 CFR 239.24
and 274.5], must file a monthly report of portfolio holdings on Form N-PORT [17 CFR
274.150], current as of the last business day, or last calendar day, of the month.

On May 20, 2015, the Commission issued a release proposing that certain funds
file Form N-PORT, as described above, as part of an investment company reporting
modernization proposal. 1 Similar to Form N-MFP [17 CFR 274.201], proposed Form NPORT would require funds to report portfolio holdings information in a structured, XML
format. The form would be filed electronically using the Commission’s electronic filing
system (Electronic Data Gathering, Analysis and Retrieval or “EDGAR”). Consistent
1

See Investment Company Reporting Modernization, Investment Company Act Release No. 31610
(May 20, 2015) (“Reporting Modernization Proposal”).

with the current portfolio disclosure regime, only information reported for the third
month of each fund’s fiscal quarter on Form N-PORT would be made publicly available,
and such information would not be made public until 60 days after the end of the third
month of the fund’s fiscal quarter. This approach is intended to minimize the harm of
free-riding and front running activity that might occur with more frequent or rapid public
disclosure.

2.

Purpose of the Information Collection

The information provided in reports on Form N-PORT could be used by the
Commission in its regulatory, disclosure review, inspection, and policymaking roles.
Unlike many other federal information collections, which are primarily for the use and
benefit of the collecting agency, this information collection would also be for the use and
benefit of investors. As discussed above, the Commission would make information
reported for the third month of each fund’s fiscal quarter on Form N-PORT publicly
available. The Commission expects that investors would be able to use this information
to make more informed investment decisions either through direct use or through
analyses prepared by third-party users that provide services to investors.
3.

Role of Improved Information Technology

The Commission’s EDGAR electronic filing system is designed to automate the
filing, processing and dissemination of full disclosure filings. The system permits filers
to transmit filings to the Commission electronically. This automation has increased the
speed, accuracy and availability of information, generating benefits to investors and
financial markets. Reports on Form N-PORT are filed with the Commission
electronically on EDGAR. The public may access filings on EDGAR through the

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Commission’s Internet Web site (http://www.sec.gov) or at EDGAR terminals located at
the Commission’s public reference rooms.
4.

Efforts to Identify Duplication

The Commission periodically evaluates rule-based reporting and recordkeeping
requirements for duplication, and reevaluates them whenever it proposes a rule or a
change in a rule. Although reports of portfolio holdings on Form N-PORT for the first
and third fiscal quarters of each fund’s fiscal year would be largely redundant with
similar reports on Form N-Q, the Commission has proposed to rescind Form N-Q to
avoid such duplication. 2 Funds would also report certain information on Form N-PORT
in a structured format that may be similarly disclosed or reported elsewhere in a nonstructured format (e.g., portfolio investments are also currently included as part of the
schedules of investments contained in shareholder reports, and filed on a semi-annual
basis with the Commission on Form N-CSR). Because collecting information in a
structured format would enhance the ability of the Commission as well as investors and
other potential users to analyze portfolio data, the Commission believes it is appropriate
to require this information to be reported on Form N-PORT.
5.

Effect on Small Entities

The Commission would provide smaller entities (i.e., funds that together with
other investment companies in the same “group of related investment companies” have
net assets of less than $1 billion as of the end of the most recent fiscal year) an extra 12
months (or 30 months after the effective date) to comply with the new reporting
requirements for Form N-PORT.
2

See Reporting Modernization Proposal, supra note 1.

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However, the proposed requirements for reports on Form N-PORT would not
distinguish between small entities and other funds in terms of what information would be
required to be reported. The Commission believes that imposing different reporting
requirements on smaller funds would not be consistent with investor protection and the
purposes of portfolio holdings reports. Differing reporting requirements would not
provide comparable information about portfolio holdings held by small entities and other
funds that could be used by Commission staff to identify trends and outliers and by
investors to make informed investment decisions.
The Commission reviews all rules periodically, as required by the Regulatory
Flexibility Act, to identify methods to minimize recordkeeping or reporting requirements
affecting small entities.
6.

Consequences of Less Frequent Collection

Funds would be required to file reports on Form N-PORT with the Commission
no later than 30 days after the end of each month. Less frequent collection would mean
that current information would not be available to the Commission.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

Rule 30b1-9 requires funds to submit reports on Form N-PORT on a monthly
basis. Given the rapidly changing composition of fund portfolios, monthly reports are
necessary to ensure that the Commission receives timely and accurate portfolio holdings
information.
8.

Consultation Outside the Agency

The Commission and the staff of the Division of Investment Management
participate in an ongoing dialogue with representatives of the investment company

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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 of information requirements in Form N-PORT before it
submitted this request for extension and approval to the Office of Management and
Budget.
9.

Payment or Gift to Respondents

Not applicable.
10.

Assurance of Confidentiality

Not applicable.
11.

Sensitive Questions

No PII collected/not applicable. A System of Records Notice (SEC-6) can be
found at http://www.sec.gov/about/privacy/secprivacyoffice.htm.
12.

Estimate of Hour Burden

We estimate that the burden hours that would be imposed by Form N-PORT are
as follows:
We estimate that 10,710 funds 3 would be required to file, on a monthly basis, a
complete report on proposed Form N-PORT reporting certain information regarding the fund
and its portfolio holdings. Based on our experience with other interactive data filings, we
estimate that funds would prepare and file their reports on proposed Form N-PORT by either
(1) licensing a software solution and preparing and filing the reports in house, or (2) retaining

3

This estimate includes 8,731 mutual funds (excluding money market funds), 1,411 ETFs
and 568 closed-end funds and is based on ICI statistics as of December 31, 2014
available at http://www.ici.org/research/stats.

5

a service provider to provide data aggregation, validation and/or filing services as part of the
preparation and filing of reports on proposed Form N-PORT on behalf of the fund. We
estimate that 35% of funds (3,749 funds) would license a software solution and file reports on
proposed Form N-PORT in house. 4 We further estimate that each fund that files reports on
proposed Form N-PORT in house would require an average of approximately 44 burden
hours to compile (including review of the information), tag, and electronically file a report on
proposed Form N-PORT for the first time 5 and an average of approximately 14 burden hours
for subsequent filings. 6

4

See Amendments to Form PF, Investment Company Act Release No. 31166 (July 23,
2014) [79 FR 47736 (Aug. 14, 2014)] (“Money Market Fund Reform 2014 Release”), at
47945 (adopting amendments to Form N-MFP and noting that approximately 35% of
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).

5

We anticipate that these funds would use the same software that was used to generate
reports on Form N-Q and that the software vendor offering the Form N-Q software would
likely offer an update to that software to handle reports on Form N-PORT. Accordingly,
we estimate the burden associated with information that is currently filed on Form N-Q
and that would also be filed on Form N-PORT to generally be the same – 10.5 hours per
filing. With respect to new data that would be required by Form N-PORT that was not
required by Form N-Q, we generally estimate that it would initially take up to 10 hours to
connect the software to the new data points. However, because we understand risk
metrics data may be located on a different system than portfolio holdings data and
because current reporting requirements do not require funds to have a process in place for
these two systems to work together, with respect to the new risk metrics data that would
be required by Form N-PORT, we estimate that it would initially take up to 15 hours to
connect the risk metrics data to the software and that, once connected, it would take 5
hours to program the risk metrics software to output the required data to the Form NPORT software. Additionally, we added another 3.5 hours to our estimated initial burden
to account for the increased amount of information that would be required to be reported
on Form N-PORT, but that is not currently required by Form N-Q. See infra note 6
(discussing the additional 30% burden added to the current Form N-Q estimate). We also
note that funds that are part of a larger fund complex may realize certain economies of
scale when preparing and filing reports on proposed Form N-PORT. For purposes of our
analysis, we do not account for such economies of scale.

6

We anticipate that most of the burden associated with licensing a software solution, as
discussed above, will be a one-time burden. Accordingly, we estimate approximately 14
hours per fund for subsequent filings. This estimate is based on the 10.5 hours currently
estimated for filings on Form N-Q, plus 30% to account for the amount of additional

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Therefore, we estimate the per fund average annual hour burden associated with
proposed Form N-PORT for 3,749 fund filers is 198 hours for the first year 7 and 168 hours
for each subsequent year. 8 Amortized over three years, the average aggregate annual hour
burden would be 178 hours per fund. 9
We estimate that 65% of funds (6,962 funds) would retain the services of a third party
to provide data aggregation, validation and/or filing services as part of the preparation and
filing of reports on proposed Form N-PORT on the fund’s behalf. 10 Because reports on Form
N-PORT would be filed in a structured format and more frequently than current portfolio
holdings reports (i.e., Form N-CSR and Form N-Q), we anticipate that funds and their thirdparty service providers will move to automate the aggregation and validation process to the
extent they do not already use an automated process for portfolio holdings reports. For these
funds, we estimate that each fund would require an average of approximately 60 burden
hours to compile and review the information with the service provider prior to electronically
filing the report for the first time 11 and an average of approximately 9 burden hours for

information that would be required to be filed on Form N-PORT. Additionally, because
we believe that the required information is generally maintained by funds pursuant to
other regulatory requirements or in the ordinary course of business, for the purposes of
our analysis, we have not ascribed any time to collecting the required information. See
also supra note 5 (noting that our estimates do not account for economies of scale).
7

The estimate is based on the following calculation: (1 filing x 44 hours) + (11 filings x 14
hours) = 198 burden hours in the first year.

8

This estimate is based on the following calculation: 12 filings x 14 hours = 168 burden
hours in each subsequent year.

9

The estimate is based on the following calculation: (198 + (168 x 2)) / 3 = 178.

10

See Money Market Fund Reform 2014 Release, supra note 4, at 47945 (adopting
amendments to Form N-MFP and noting that approximately 65% of 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).

11

In order to be able to automate the process of communicating data to a third-party service
provider so that it can be reported on Form N-PORT, we estimate that it will initially take

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subsequent filings. 12 Therefore, we estimate the per fund average annual hour burden
associated with proposed Form N-PORT for 6,962 funds would be 159 hours for the first
year 13 and 108 hours for each subsequent year. 14 Amortized over three years, the average
aggregate annual hour burden would be 125 hours per fund. 15 In sum, we estimate that filing
reports on proposed Form N-PORT would impose an average total annual hour burden of
1,537,572 on applicable funds. 16

13.

Estimate of Total Annual Cost Burden

Cost burden is the cost of goods and services purchased to prepare and update
filings on Form N-PORT, such as for licensing software solutions or for the services of
a fund 60 hours to either procure software and integrate it into its systems or,
alternatively, to write its own software. For those funds that already have an automated
portfolio reporting process in place, we estimate that they would initially incur the same
burden as those funds that license a software solution and file reports on proposed Form
N-PORT in house. For these latter funds, however, we are using the higher burden hours
estimated for using a third party service provider in order to be conservative in our
estimates because we lack data on the number of funds that currently have an automated
portfolio reporting process in place. See supra note 5(discussing the burdens associated
with licensing a software solution and filing reports on proposed Form N-PORT in house,
and noting that our estimates do not account for economies of scale).
12

We anticipate that most of the burden associated with third-party aggregation and
validation will be the result of creating an automated process, as discussed above, and
thus will be a one-time burden. Accordingly, we estimate approximately 9 hours per fund
for subsequent filings. This estimate is based on the 10.5 hours currently estimated for
filings on Form N-Q, plus 30% to account for the amount of additional information that
would be required to be filed on Form N-PORT, and subtracting 5 hours in recognition of
the use of a third-party service provider to assist in the preparation and filing of reports
on the form. Additionally, because we believe that the required information is generally
maintained by funds pursuant to other regulatory requirements or in the ordinary course
of business, for the purposes of our analysis, we have not ascribed any time to collecting
the required information. See also supra note 5 (noting that our estimates do not account
for economies of scale).

13

The estimate is based on the following calculation: (1 filing x 60 hours) + (11 filings x 9
hours) = 159 burden hours per year.

14

The estimate is based on the following calculation: 12 filings x 9 hours = 108.

15

The estimate is based on the following calculation: (159 + (108 x 2)) / 3 = 125.

16

The estimate is based on the following calculation: (3,749 x 178 hours) + (6,962 x 125
hours) = 1,537,572.

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external service providers. The cost burden does not include the hour burden discussed
in Item 12. Estimates are based on the Commission’s experience with the filing of
registration forms.
Based on our experience with other interactive data filings, we estimate that funds
that would file reports on proposed Form N-PORT in house would license a third-party
software solution to assist in filing their reports at an average cost of $4,805 per fund per
year. 17 In addition, we estimate that funds that would use a service provider to prepare and
file reports on proposed Form N-PORT would pay an average fee of $11,440 per fund per
year for the services of that third-party provider. 18 In sum, we estimate that all applicable
funds would incur on average, in the aggregate, external annual costs of $97,674,221. 19

14.

Estimate of Cost to the Federal Government

The annual cost of reviewing and processing new registration statements,
post-effective amendments, proxy statements, and shareholder reports of investment
companies amounted to approximately $19.2 million in fiscal year 2014, based on the

17

We estimate that money market funds that file reports on Form N-MFP in house license a
third-party software solution for approximately $3,696 per fund per year. Due to the
increased volume and complexity of the information that would be filed in reports
pursuant to proposed Form N-PORT, we have increased our external cost estimate for
funds filing in house on proposed Form N-PORT by 30% (or $1,109).

18

We estimate that money market funds that file reports on Form N-MFP through a thirdparty service provider pay approximately $8,800 per fund per year. Due to the increased
volume and complexity of the information that would be filed in reports pursuant to
proposed Form N-PORT, we have increased our estimate for funds filing through a thirdparty service provider on proposed Form N-PORT by 30% (or $2,640).

19

This estimate is based on the following calculation: (3,749 funds that would file reports
on proposed Form N-PORT in house x $4,809 per fund, per year) + (6,962 funds that
would file reports on proposed Form N-PORT using a third-party service provider x
$11,440 per fund, per year) = $97,674,221.

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Commission’s computation of the value of staff time devoted to this activity and related
overhead. The RIN number for the Reporting Modernization Proposal is 3235-AL42. 20
15.

Explanation of Changes in Burden

Not applicable. This is the first request for approval of the collection of
information for this rule and form.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to not Display Expiration Date

We request authorization to omit the expiration date on the electronic version of
the form for design and IT project scheduling reasons. The OMB control number will be
displayed.
18.

Exceptions to Certification Statement

Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS

Not applicable.

20

See Reporting Modernization Proposal, supra note 1.

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