SEC seeks to modernise investment reporting and disclosures

John Glennon John Glennon

In a unanimous vote May 20, 2015, the Securities and Exchange Commission (SEC)
proposed reporting and disclosure changes for investment companies and registered
investment advisers. Primary goals of the proposals are to modernise and enhance the disclosures while improving the SEC’s use of technology in collecting, monitoring and analysing risks.

The SEC specifically hopes to enhance data collection related to derivatives, securities lending activities, liquidity, and pricing of portfolio instruments for registered investment companies, not including money market funds. Further, the proposed changes would expand the SEC’s ability to identify and monitor risks of registered investment companies and registered investment advisers. The agency feels the new measures are necessary due to the growth of new and more complex investment products and strategies.

These new proposals include:

  • new forms: mutual funds, Exchange-Traded Funds (ETFs) and other registered investment companies would be required to file two new forms designed to gather structured data, allowing for better public and private data analysis:                                    – Form N-PORT: a monthly portfolio reporting form; and                                            – Form N-CEN: an annual reporting form that would gather census-type information;
  • regulation S-X (enhanced financial statement disclosures): enhanced, standardised financial statement disclosures would be required;
  • form ADV amendments: these amendments would require investment advisers to provide additional risk information;
  • website disclosure: a proposed new rule of the Investment Company Act (i.e. proposed Investment Company Act Rule 30e-3) would permit mutual funds and other investment companies to provide shareholder reports via a website; and
  • investment adviser-related amendments: Investment Advisers Act of 1940 (Investment Advisers Act) Rule 204-2 amendments would require advisers to maintain records of performance calculations and performance communications.