On December 8, 2017, citing the “importance of sound data security practices and protocols for sensitive, nonpublic information,” the Securities and Exchange Commission (SEC) adopted a temporary final rule postponing the filing of Form N-PORT on EDGAR until April 30, 2019 (originally July 30, 2018) for larger fund groups (those with net assets of $1 billion or more) and until April 30, 2020 for smaller fund groups (originally June 1, 2019). The SEC also delayed the rescission of Form N-Q.
Form N-PORT requires registered investment companies (other than money market funds, small business investment companies, and unit investment trusts that operate as ETFs) to report information about their complete monthly portfolio holdings, in addition to other information, to the SEC in extensible markup language (XML) structured data format no later than 30 days after the close of each month.
According to the SEC, the EDGAR system receives over 1.7 million electronic filings per year. In an effort to strengthen the SEC’s (and EDGAR’s) cybersecurity risk profile going forward, and to protect nonpublic information filed, the SEC “initiated a focused review and, as necessary or appropriate, uplift of the EDGAR system.” Certain enhancements, the SEC said, “which will be designed to improve EDGAR’s functionality and security, could negatively affect EDGAR’s ability to validate and accept Form N-PORT filings in a timely manner, in particular during peak filing periods.”
The new Rule (30b1-9(T)), however, which has the effect of delaying the filing of the Form, still requires larger fund groups that are subject to the June 1, 2018 compliance date to satisfy their reporting obligation by that date and maintain in their records the information required to be included in Form N-PORT; they just do not have to file that information via EDGAR. These records are treated as records under Section 31 of the Investment Company Act of 1940 and Rule 31a-1, and are subject to the requirements of Rule 31a-2 (generally, preservation of records for no less than six years, the first two of which in an easily accessible place). These records must be made available to the SEC upon request. Smaller fund groups are not subject to the requirement to maintain Form N-PORT information in their records during the postponement.
In other words, funds have only been relieved of their filing obligations and must still comply with the June 1, 2018 compliance date.
While at first glance the postponement appears to relieve fund groups of certain requirements, its practical effect may be to create additional administrative burdens. Not only are fund groups responsible for maintaining records that meet the requirements of Form N-PORT, they must still file Form N-Q.