Final Rule: Investment Company Reporting Modernization

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SECURITIES AND EXCHANGE COMMISSION17 CFR Parts 200, 210, 232, 239, 240, 249, 270, 274[Release Nos. 33-10231; 34-79095; IC-32314; File No. S7-08-15]RIN 3235-AL42INVESTMENT COMPANY REPORTING MODERNIZATIONAGENCY: Securities and Exchange Commission.ACTION: Final rule.SUMMARY: The Securities and Exchange Commission is adopting new rules and forms aswell as amendments to its rules and forms to modernize the reporting and disclosure ofinformation by registered investment companies. The Commission is adopting new FormN-PORT, which will require certain registered investment companies to report information abouttheir monthly portfolio holdings to the Commission in a structured data format. In addition, theCommission is adopting amendments to Regulation S-X, which will require standardized,enhanced disclosure about derivatives in investment company financial statements, as well asother amendments. The Commission is adopting new Form N-CEN, which will requireregistered investment companies, other than face-amount certificate companies, to annuallyreport certain census-type information to the Commission in a structured data format. TheCommission is adopting amendments to Forms N-1A, N-3, and N-CSR to require certaindisclosures regarding securities lending activities. Finally, the Commission is rescinding currentForms N-Q and N-SAR and amending certain other rules and forms. Collectively, theseamendments will, among other things, improve the information that the Commission receivesfrom investment companies and assist the Commission, in its role as primary regulator ofinvestment companies, to better fulfill its mission of protecting investors, maintaining fair,orderly and efficient markets, and facilitating capital formation. Investors and other potential

users can also utilize this information to help investors make more informed investmentdecisions.DATES:Effective Dates: This rule is effective January 17, 2017, except for the following: The amendments to sections 17 CFR 200.800, 17 CFR 232.105, 17 CFR 232.301, 17CFR 240.10A-1, 17 CFR 240.12b-25, 17 CFR 240.13a-10, 17 CFR 240.13a-11, 17CFR 240.13a-13, 17 CFR 240.13a-16, 17 CFR 240.15d-10, 17 CFR 240.15d-11, 17CFR 240.15d-13, 17 CFR 240.15d-16, 17 CFR 249.322, 17 CFR 249.330, 17 CFR270.8b-16, 17 CFR 270.10f-3, 17 CFR 270.30a-1, 17 CFR 270.30a-4, 17 CFR270.30b1-1, 17 CFR 270.30b1-2, 17 CFR 270.30b1-3, 17 CFR 274.101, and 17 CFR274.218, and in Instruction 55 are effective June 1, 2018; and The amendments to sections 17 CFR 232.401, 17 CFR 249.332, 17 CFR 270.8b-33,17 CFR 270.30a-2, 17 CFR 270.30a-3, and 17 CFR 270.30b1-5, and 17 CFR 274.130,and in Instructions 54, 57, 59, and 61 are effective August 1, 2019.Compliance Dates: The applicable compliance dates are discussed in section II.H. of thisfinal rule.FOR FURTHER INFORMATION CONTACT: Daniel K. Chang, Senior Counsel,J. Matthew DeLesDernier, Senior Counsel, Jacob D. Krawitz, Senior Counsel, AndreaOttomanelli Magovern, Senior Counsel, Naseem Nixon, Senior Counsel, Michael C. Pawluk,Senior Special Counsel, or Sara Cortes, Assistant Director, at (202) 551-6792, InvestmentCompany Rulemaking Office, Matt Giordano, Chief Accountant, or Kristy Von Ohlen, AssistantChief Accountant, Chief Accountant’s Office, at (202) 551-6918, Division of Investment2

Management, Securities and Exchange Commission, 100 F Street, NE, Washington, DC20549-8549.SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission (the“Commission”) is adopting new Form N-PORT [referenced in 17 CFR 274.150] and new FormN-CEN [referenced in 17 CFR 274.101] under the Investment Company Act of 1940 [15 U.S.C.80a-1 et seq.] (“Investment Company Act”); new rules 30a-4 [17 CFR 270.30a-4] and 30b1-9[17 CFR 270.30b1-9] under the Investment Company Act; rescinding rules 30b1-1[17 CFR 270.30b1-1], 30b1-2 [17 CFR 270.30b1-2], 30b1-3 [17 CFR 270.30b1-3], and 30b1-5[17 CFR 270.30b1-5] under the Investment Company Act; adopting amendments to rules 8b-16[17 CFR 270.8b-16], 8b-33 [17 CFR 270.8b-33], 10f-3 [17 CFR 270.10f-3], 30a-1 [17 CFR270.30a-1], 30a-2 [17 CFR 270.30a-2], 30a-3 [17 CFR 270.30a-3], and 30d-1 [17 CFR270.30d-1], and Form N-8F [referenced in 17 CFR 274.218] under the Investment Company Act;adopting amendments to Forms N-1A [referenced in 17 CFR 274.11A], N-2 [referenced in274.11a-1], N-3 [referenced in 274.11b], N-4 [referenced in 17 CFR 274.11c], and N-6[referenced in 17 CFR 274.11d] under the Investment Company Act and the Securities Act of1933 [15 U.S.C. 77a et seq.] (“Securities Act”); adopting amendments to Form N-14 [referencedin 17 CFR 239.23] under the Securities Act; rescinding Form N-SAR [referenced in 17 CFR274.101 and Form N-Q [referenced in 17 CFR 274.130] and adopting amendments to FormN-CSR [referenced in 17 CFR 274.128] under the Investment Company Act and SecuritiesExchange Act of 1934 [15 U.S.C. 78a et seq.] (“Exchange Act”); adopting amendments to rules10A-1 [17 CFR 240.10A-1], 12b-25 [17 CFR 240.12b-25], 13a-10 [17 CFR 240.13a-10], 13a-11[17 CFR 240.13a-11], 13a-13 [17 CFR 240.13a-13], 13a-16 [17 CFR 240.13a-16], 15d-10[17 CFR 240.15d-10], 15d-11 [17 CFR 240.15d-11], 15d-13 [17 CFR 240.15d-13], and 15d-163

[17 CFR 240.15d-16] under the Exchange Act; rescinding section 332 [17 CFR 249.332] andadopting amendments to sections 322 [17 CFR 249.322] and 330 [17 CFR 249.330] of 17 CFRPart 249; adopting amendments to Article 6 [17 CFR 210.6-01 et seq.] and Article 12 [17 CFR210.12-01 et seq.] of Regulation S-X [17 CFR 210]; adopting amendments to section 800 of 17CFR Part 200 [17 CFR 200.800]; and adopting amendments to rules 105 [17 CFR 232.105], 301[17 CFR 232.301], and 401 [17 CFR 232.401] of Regulation S-T [17 CFR 232].4

TABLE OF CONTENTSI.Background . 8A. Changes in the Industry and Technology. 8B. Summary of Changes to Current Reporting Regime . 111. Form N-PORT and Amendments to Regulation S-X . 132. Form N-CEN . 15II. Discussion . 17A. Form N-PORT . 171. Who Must File Reports on Form N-PORT . 252. Information Required on Form N-PORT . 283. Reporting of Information on Form N-PORT . 1374. Disclosure of Information Reported on Form N-PORT . 145B. Rescission of Form N-Q and Amendments to Certification Requirements ofForm N-CSR . 1581. Rescission of Form N-Q . 1582. Amendments to Certification Requirements of Form N-CSR . 159C. Amendments to Regulation S-X . 1611. Overview . 1612. Enhanced Derivatives Disclosures . 1643. Amendments to Current Rules 12-12 through 12-12C . 1874. Instructions Common to Rules 12-12 through 12-12B and 12-13 through12-13D . 1925. Investments In and Advances to Affiliates – Rule 12-14 . 1986. Form and Content of Financial Statements . 200D. Form N-CEN and Rescission of Form N-SAR . 2091. Overview . 2092. Who Must File Reports on Form N-CEN . 2133. Frequency of Reporting and Filing Deadline. 2154. Information Required on Form N-CEN . 2205. Items Required by Form N-SAR That Will be Eliminated by FormN-CEN . 296E. Option for Website Transmission of Shareholder Reports . 309F. Amendments to Forms Regarding Securities Lending Activities. 3111. Determination to Adopt Requirements as Amendments to RegistrationStatement and Annual Report Forms . 3142. Requirement to Disclose Securities Lending Income, Expenses, andServices . 3153. Required Disclosures of Monthly Average Value on Loan . 323G. Technical and Conforming Amendments . 323H. Compliance Dates . 3265

1. Form N-PORT, Rescission of Form N-Q, and Amendments to theCertification Requirements of Form N-CSR . 3262. Form N-CEN, Rescission of Form N-SAR, and Amendments to theExhibit Requirements of Form N-CSR . 3333. Regulation S-X, Statement of Additional Information, and RelatedAmendments . 336III. Economic Analysis . 338A. Introduction . 338B. Form N-PORT, Rescission of Form N-Q, and Amendments to Form N-CSR . 3431. Introduction and Economic Baseline . 3432. Benefits . 3493. Costs. 3604. Alternatives . 376C. Amendments to Regulation S-X . 3851. Introduction and Economic Baseline . 3852. Benefits . 3873. Costs. 3914. Alternatives . 399D. Form N-CEN and Rescission of Form N-SAR . 4031. Introduction and Economic Baseline . 4032. Benefits . 4043. Costs. 4104. Alternatives . 413E. Amendments to Forms Regarding Securities Lending Activities. 4181. Introduction and Economic Baseline . 4182. Benefits . 4213. Costs. 4224. Alternatives . 426F. Other Alternatives to the Reporting Requirements . 427IV. Paperwork Reduction Act . 430A. Portfolio Reporting . 4331. Form N-PORT . 4332. Rescission of Form N-Q . 441B. Census Reporting . 4421. Form N-CEN . 4422. Rescission of Form N-SAR . 450C. Amendments to Regulation S-X . 4511. Rule 30e-1 . 4522. Rule 30e-2 . 457D. Amendments to Registration Statement Forms . 461E. Amendments to Form N-CSR. 4646

V. Final Regulatory Flexibility Analysis. 469A. Need for and Objectives of the Forms and Form Amendments and Rulesand Rule Amendments . 470B. Significant Issues Raised by Public Comments . 470C. Small Entities Subject to the Rule . 473D. Projected Reporting, Recordkeeping, and Other Compliance Requirements . 4741. Form N-PORT . 4742. Rescission of Form N-Q . 4753. Form N-CEN . 4764. Rescission of Form N-SAR . 4775. Regulation S-X Amendments . 4786. Amendments to Registration Statement Forms . 4797. Amendments to Form N-CSR. 480E. Agency Action to Minimize Effect on Small Entities . 481VI. Statutory Authority . 4827

I.BACKGROUNDA.Changes in the Industry and TechnologyAs the primary regulator of the asset management industry, the Commission relies oninformation included in reports filed by registered investment companies (“funds”)1 andinvestment advisers for a number of purposes, including monitoring industry trends, informingpolicy and rulemaking, identifying risks, and assisting Commission staff in examination andenforcement efforts. Over the years, however, as assets under management and complexity inthe industry have grown, so too has the volume and complexity of information that theCommission must analyze to carry out its regulatory duties.Commission staff estimates that there were approximately 17,052 funds registered withthe Commission, as of December 2015.2 Commission staff further estimates that there werenearly 12,000 investment advisers registered with the Commission, along with another 3,138advisers that file reports with the Commission as exempt reporting advisers, as of January 2016.31For purposes of the preamble of this release, we use “funds” to mean registered investmentcompanies other than face-amount certificate companies and any separate series thereof—i.e.,management companies and unit investment trusts. In addition, we use the term “managementcompanies” or “management investment companies” to refer to registered management investmentcompanies and any separate series thereof. We note that “fund” may be separately and differentlydefined in each of the new or amended forms or rules.2Based on data obtained from the Investment Company Institute (“ICI”) and reports filed byregistrants on Form N-SAR. The 17,052 funds include mutual funds (including funds of funds andmoney market funds), closed-end funds, exchange-traded funds (“ETFs”), and unit investment trusts(“UITs”). See ICI, 2016 I NVESTMENT C OMPANY F ACT B OOK (56th ed., 2016) (“2016 ICI FactBook”) at 22, available at factbook.pdf; see also infra footnote 1259and accompanying and following text.3Based on Investment Adviser Registration Depository (“IARD”) system data. In 2010 Congresscharged the Commission with implementing new reporting and registration requirements for certaininvestment advisers to private funds (known as “exempt reporting advisers”). See Dodd-Frank WallStreet Reform and Consumer Protection Act, Pub. L. 111-203, 124 Stat. 1376, 1570–80 (2010).Form ADV is used by registered investment advisers to register with the Commission and with thestates and by exempt reporting advisers to report information to the Commission. Information onForm ADV is available to the public through the Investment Adviser Public Disclosure System,8

At year-end 2015, assets of registered investment companies exceeded 18 trillion, having grownfrom about 5.8 trillion at the end of 1998.4 At the same time, the industry has developed newproduct structures, such as ETFs5, new fund types, such as target date funds with asset allocationstrategies,6 and increased its use of derivatives and other alternative strategies.7 These productsand strategies can offer greater opportunities for investors to achieve their investment goals, butthey can also add complexity to funds’ investment strategies, amplify investment risk, or haveother risks, such as counterparty credit risk.While these changes have been taking place in the fund industry, there have also beensignificant advances in the technology that can be used to report and analyze information. Wehave started to use structured data formats to collect, aggregate, and analyze data reported bywhich allows the public to access the most recent Form ADV filing made by an investment adviserand is available at The Commission recently adoptedamendments to Form ADV. See Form ADV and Investment Adviser Act Rules, Investment AdvisersAct Release No. 4509 (August 25, 2016) [81 FR 60417 (September 1, 2016)] (“Form ADV Release”).4See 2016 ICI Fact Book, supra footnote 2, at 9.5See generally Exchange-Traded Funds, Securities Act Release No. 8901 (Mar. 11, 2008) [73 FR14618 (Mar. 18, 2008)] (“ETF Proposing Release”) at 14619; Request for Comment on ExchangeTraded Products, Securities Exchange Act Rel. No. 34-75165 (June 12, 2015); see also ICI,Exchange-Traded Funds April 2016 (May 27, 2016), available at 04 16 (discussing

270.30d-1], and Form N-8F [referenced in 17 CFR 274.218] under the Investment Company Act; adopting amendments to Forms N-1A [referenced in 17 CFR 274.11A], N-2 [referenced in . [17 CFR 232.301], and 401 [17 CFR 232.401] of Regulation S-T [17 CFR 232]. 5 TABLE OF CONTENTS

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