By David Scalzetti, CFA - Senior Regulatory Products Director, ICE Data Services

The SEC’s Reporting Modernization rule has been updated to include a filing delay. This has broadly been received as a “no real delay” as funds are still required to calculate all of the information for Form N-PORT, archive it, and make it available to the SEC upon request. This means the only real delay is in filing the report on EDGAR, with the SEC citing the industry’s cybersecurity concerns as the reason for this change. However, smaller funds (i.e. fund complexes with less than $1BN AUM) are not required to archive or file Form N-PORT until April 30, 2020 – a 9-month delay from before the interim final ruling.

Two Items To Be Aware Of
  1. The first 6-months of publicly filed reports will still remain nonpublic even after accounting for the filing delay
  2. Form N-CEN, the annual fund census form, is unaffected by this interim final ruling – funds regardless of their size are expected to file Form N-CEN effective their year-end starting June 2018

We have worked with numerous fund complexes on N-PORT and virtually all are continuing to forge ahead with their implementations even in light of this interim rule. Most funds we have spoken with plan on engaging their regulatory filing software providers and performing all of the required actions except “hit send” to file the report on EDGAR.

ICE Data Services has seen a dramatic increase in the last few month in requests for sample N-PORT data and coverage checks as funds ramp up their efforts to comply. Many funds we have spoken with have already selected their software provider and are now focused on the data sourcing required for Form N-PORT. The required data covers attributes typically available from custodians and/or fund accounting systems to elements that funds have expressed more difficulty in sourcing. Some examples include issuer LEI, country of risk, and some of the new, enhanced fixed income and derivatives disclosures (e.g. convertible bonds require conversion flags, identifier of what instrument(s) it converts into, and a corporate actions adjusted conversion ratio).

Many funds we have spoken with have already selected their software provider and are now focused on the data sourcing required for Form N-PORT.

An additional complexity involves new taxonomy or classification data required by the SEC on Form N-PORT. While there are up to 7 new classifications requirements under N-PORT, two notable are Item C.4.i and Item C.4.ii – Asset Type classification and Issuer Type classification respectively. Although many instruments are straightforward classifications, there are significant gray areas, and our client outreach has shown a lack of industry consensus.

Overall, larger ($1+BN AUM complex) funds should not be slowing their implementation of the N-PORT & N-CEN rules as they are required to archive the data effective June 2018. I don’t believe differing opinions for classifications are problematic if a fund has sound policies and procedures that are consistently applied. Ensuring gray areas are well-documented and understanding your vendor’s approach for the classifications, if applicable, will be key.

Explore how ICE Data Services can help with Form N-PORT compliance.

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