Fears over the effects of a possible run on mutual funds were addressed Thursday when the Securities and Exchange Commission approved new reporting rules.
The SEC chose to adopt changes to “modernize and enhance” the reporting and disclosure of information required from registered investment companies and “to enhance liquidity risk management by open-end funds, including mutual funds and exchange-traded funds.”
“The new rules will enhance the quality of information available to investors and will allow the Commission to more effectively collect and use data reported by funds,” it argued. “The new rules also will promote effective liquidity risk management across the open-end fund industry and will enhance disclosure regarding fund liquidity and redemption practices.”
The new rules are part of the SEC’s initiative to enhance its monitoring and regulation of the asset management industry.
“These new rules represent a sweeping change for the industry by requiring strong transparency provisions and enhanced investor protections,” SEC Chair Mary Jo White said in a statement. “Funds will more effectively manage liquidity risk and both Commission staff and investors will receive additional and better quality information about fund holdings.”
Specifically, registered funds will be required to file a new monthly portfolio reporting form (Form N-PORT) and a new annual reporting form (Form N-CEN) that will require census-type information. The information will be reported in a structured data format, which “will allow the Commission and the public to better analyze the information.”
The rules also will require enhanced and standardized disclosures in financial statements and will add new disclosures in fund registration statements relating to a fund’s securities lending activities.
The Investment Company Institute called the SEC’s action a “tough set of new rules that will spur a number of operational changes across the registered fund industry, but adopted a somewhat conciliatory tone by commending “White and the SEC for advancing this work, as the Commission is the appropriate body to address areas of potential risk in activities and products related to asset management.”
“We are extremely disappointed, however, that the SEC did not take the opportunity to change the default delivery for annual and semi-annual reports to online delivery, a step that would give investors the information they need in a more useful form while saving shareholders billions of dollars,” it added.