Form N-PORT Supporting Statement with Liquidity

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…” Final 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 October 13, 2016, the Commission issued a release adopting rules requiring
that certain funds file Form N-PORT, as described above, as part of an investment
company reporting modernization release. 1 On that same day, the Commission also
issued a companion release adopting additional reporting requirements on Form N-PORT

1

See Investment Company Reporting Modernization, Investment Company Act Release No. 32314
(October 16, 2016) (“Reporting Modernization Adoption”).

related to liquidity risk management. 2 Similar to Form N-MFP [17 CFR 274.201], Form
N-PORT will require funds to report portfolio holdings information in a structured, XML
format. The form will be filed electronically using the Commission’s electronic filing
system (Electronic Data Gathering, Analysis and Retrieval or “EDGAR”). Consistent
with the current portfolio disclosure regime, only information reported for the third
month of each fund’s fiscal quarter on Form N-PORT will be made publicly available,
and such information will 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.

On March 14, 2018 proposed amendments to rescind the requirement that funds
publicly disclose their aggregate liquidity profile on a quarterly basis with a 60-day
delay. 3 We believe that public disclosure of this information would be of limited to no
utility to investors without broader context and, therefore, may be confusing. However,
because we would otherwise be unable to determine the amount of a fund's highly liquid
investments that is actually unavailable to meet redemptions, we also proposed to redesignate reporting about the amount of a fund's highly liquid investments that are
segregated or pledged to cover less liquid derivatives transactions to the non-public
portion of the form. Finally, the Commission proposed other amendments to Form NPORT to add an additional disclosure requirement relating to the fund's and other
registrant's holdings of cash and cash equivalents not reported in Parts C and D of the
2

See Investment Company Liquidity Risk Management Programs, Investment Company Act
Release No. 32315 (October 13, 2016) (the “Liquidity Adopting Release”).

3

Investment Company Liquidity Disclosure, Investment Company Act Release No. 33046 (Mar.
14, 2018) [83 FR 11905 (Mar. 19, 2018)] (the “Proposing Release”).

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Form and to allow funds the option of splitting a fund's holding into more than one
classification category in three specified circumstances. We believe these additional
amendments enhance, the liquidity data reported to the Commission. In addition, for
some funds, these proposed changes may also reduce cost burdens as they comply with
the rule.
2.

Purpose and Use of the Information Collection

The title for the collection of information is: Rule 30b1-9 and Form N-PORT.
The information provided in reports on Form N-PORT will 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 will also be for the use and benefit of
investors. The Commission will make information reported for the third month of each
fund’s fiscal quarter on Form N-PORT publicly available
3.

Consideration Given to 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
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

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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 adopted rules rescinding Form N-Q to
avoid such duplication. 4 Funds will 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 will 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 will 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 6
months to comply with the proposed amendments to Form N-PORT.
However, the requirements for reports on Form N-PORT will not distinguish
between small entities and other funds in terms of what information will be required to be
reported, including the information required by the proposed amendments. The
Commission believes that imposing different reporting requirements on smaller funds
4

See Reporting Modernization Adoption, supra note 1.

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will not be consistent with investor protection and the purposes of portfolio holdings
reports. Differing reporting requirements will 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 Not Conducting Collection

Funds will 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 will 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
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

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comment on the proposed amendments to Form N-PORT and related information
collection requirements before it submitted this request for revision and approval to the
OMB. Before adopting the proposed amendments to Form N-PORT, the Commission
will receive and evaluate public comments on the proposal and its collection of
information requirements.
9.

Payment or Gift

Not applicable.
10.

Confidentiality

Not applicable.
11.

Sensitive Questions

No information of a sensitive nature, including social security numbers, will be
required under this collection of information. The information collection collects basic
Personally Identifiable Information (PII) that may include names, job titles, work
addresses and telephone numbers. However, the agency has determined that the
information collection does not constitute a system of record for purposes of the Privacy
Act. Information is not retrieved by a personal identifier. In accordance with Section
208 of the E-Government Act of 2002, the agency has conducted a Privacy Impact
Assessment (PIA) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, published on 1/29/2016, is provided as a supplemental
document and is also available at https://www.sec.gov/privacy.
12.

Burden of Information Collection

In the Liquidity Adopting Release, we estimate that, for the 35% of funds that
would file reports on Form N-PORT in house, the per fund average aggregate annual

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hour burden will be 144 hours per fund, and the average cost to license a third-party
software solution will be $4,805 per fund per year. 5 For the remaining 65% of funds that
would retain the services of a third party to prepare and file reports on Form N-PORT on
the fund's behalf, we estimate that the average aggregate annual hour burden will be 125
hours per fund, and each fund will pay an average fee of $11,440 per fund per year for
the services of third-party service provider. In sum, we estimate that filing liquidityrelated information on Form N-PORT will impose an average total annual hour burden of
144 hours on applicable funds, and all applicable funds will incur on average, in the
aggregate, external annual costs of $103,787,680, or $9,118 per fund. 6
Based on Commission staff experience, we believe that our proposal to rescind
the requirement that funds publicly report the aggregate classification information on
Form N-PORT will reduce the estimated burden hours and costs associated with Form NPORT by approximately one hour. We believe, however, that this reduction in burden
will be offset by the increase in burden associated with the other proposed amendments to
Form N-PORT, which we also estimate to be one hour. Therefore, we believe that there
will be no substantive modification to the existing collection of information for Form NPORT. As a result, the Commission believes that the current PRA burden estimates for
the existing collection of information requirements remain appropriate.
13.

Cost to Respondents

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

5

See Liquidity Adopting Release, supra footnote 2, at n.1237 and accompanying text.

6

See Liquidity Adopting Release, supra footnote 2, at n.1238 and accompanying text.

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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. As discussed above, we do not estimate any change to the external
costs associated with these amendments to Form N-PORT.
14.

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 $22.9 million in fiscal year 2016, based on the
Commission’s computation of the value of staff time devoted to this activity and related
overhead.
15.

Change in Burden

There is no change in the annual hour and cost burdens associated with the
proposed amendments to Form N-PORT.
16.

Information Collection Planned for Statistical Purposes

Not applicable.
17.

Approval to Omit OMB 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 for Paperwork Reduction Act
Submnission
Not applicable.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS

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Not applicable.

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