New Investment Company and Adviser Information Collecting Rules Proposed by the SEC

May 20, 2015

The SEC at an open meeting propose rules designed to increase the SEC’s regulatory oversight and risk monitoring of investment advisers and investment companies and to modernize and enhance data reporting.


With respect to investment advisers, the SEC proposed amendments to the investment adviser registration and reporting form (Form ADV) that will require investment advisers to provide additional information for the SEC and investors to better understand the risk profile of individual advisers and the industry. In addition, the SEC proposed amendments to Rule 204–2 under the Investment Advisers Act of 1940 will require advisers to maintain records of performance calculations and communications related to performance.


Specifically, the proposed amended rules will:


  • Require aggregate information related to assets held and use of borrowings and derivatives in separately managed accounts. Approximately 73% of SEC-registered investment advisers manage a wide variety of client assets in separately managed accounts, which generally provide advisory clients with individualized investment advice and direct ownership of the securities and other assets in the account.
  • Permit by rule certain “umbrella registration” filing arrangements that are currently outlined in staff guidance.
  • Provide additional information about an adviser’s advisory business and including branch office operations and the use of social media.


In addition, the proposed amendments to Rule 204-2 will require advisers to maintain records of the calculation of performance information that is distributed to any person. Currently, advisers are required to maintain performance information that is distributed to 10 or more persons. The proposed amendments also would require advisers to maintain communications related to performance or rate of return of accounts and securities recommendations.


With respect to investment companies, the SEC proposed amendments will enhance data reporting for mutual funds, ETFs and other registered investment companies. The proposals would require a new monthly portfolio reporting form (Form N-PORT) and a new annual reporting form (Form N-CEN) that would require census-type information. The information would be reported in a structured data format, which would allow the Commission and the public to better analyze the information. The proposals will also require enhanced and standardized disclosures in financial statements, and would permit mutual funds and other investment companies to provide shareholder reports by making them accessible on a website.


The four key investment company-related amendments involve:  portfolio reporting, census reporting, structured data format, reporting on fund financial statements, and shareholder reports provided on websites.


Portfolio Reporting


A new monthly portfolio reporting form, Form N-PORT, would require registered funds other than money market funds to provide portfolio-wide and position-level holdings data to the Commission on a monthly basis.  The form would require monthly reporting of the fund’s investments, including:


  • Data related to the pricing of portfolio securities.
  • Information regarding repurchase agreements, securities lending activities, and counterparty exposures.
  • Terms of derivatives contracts.
  • Discrete portfolio level and position level risk measures to better understand fund exposure to changes in market conditions.


Information contained on reports for the last month of each fund’s fiscal quarter would be available to the public.  In light of the proposed Form N-Port, the SEC also will consider rescinding Form N-Q, on which funds currently report certain portfolio holdings for the first and third fiscal quarters.


Census Reporting


A new annual reporting form, Form N-CEN, would require registered funds to annually report certain census-type information to the SEC and will replace the form currently used to report fund census information (Form N-SAR).  The form will streamline and update information reported to the SEC to reflect current information needs, such as requiring more information on exchange-traded funds and securities lending.  Reports would be filed annually within 60 days of the end of the fund’s fiscal year, rather than semi-annually as is currently required by Form N-SAR for most funds.


Structured Data Format


Funds will report portfolio and census information in a structured data format, which would improve the ability of the SEC and the public to aggregate and analyze information across all funds and to link the reported information with information from other sources.  The SEC currently receives this type of reporting for both money market funds, through Form N-MFP, and certain private funds, through Form PF. 


Reporting on Fund Financial Statements


The proposed amendments that will require enhanced and standardized disclosures in financial statements that are required in fund registration statements and shareholder reports.  The proposed amendments will include requirements to provide, for example:


  • Specific information related to derivatives, similar to the information about derivatives that would be required in the proposed monthly portfolio holdings reports.  Current requirements do not require specific information for many types of derivatives, including swaps, futures, and forwards.
  • Information in the notes to the financial statements relating to a fund’s securities lending activities.


In addition, in order to make fund derivatives holdings easier to review, the proposal would require derivative disclosures to be displayed prominently in the financial statements, rather than in the notes.


Shareholder Reports Provided on Websites


The proposal will permit mutual funds and other registered investment companies to provide shareholder reports by making them accessible on their website, as well as the funds’ quarterly portfolio holdings for the past year.  Funds currently satisfy delivery requirements by printing and mailing shareholder reports, unless investors have affirmatively requested electronic delivery.


A number of specific provisions will ensure that investors who want paper copies can continue to receive them by mail.  Funds will be required to send notices to investors regarding the change to electronic delivery and online availability of shareholder reports on a regular basis.  The notices will inform investors using plain-English principles how to receive paper copies of the shareholder report in the future, free of charge.


Click to access the release proposing the amendments.


Investment Advisers, Investment Companies