SEC opts for narrative over quantitative fund liquidity disclosures

The Securities and Exchange Commission adopted amendments to public liquidity-related disclosure requirements for certain open-end funds.  Under the amendments, funds would discuss in their annual or semi-annual shareholder report the operation and effectiveness of their liquidity risk management programs.  This requirement replaces a pending requirement that funds publicly provide a quantitative end-of-period snapshot of historic aggregate liquidity classification data for their portfolios on Form N-PORT.

In addition to today’s adoption, the Commission previously adopted a rule that extends by six months the compliance date for the classification and classification-related elements of the liquidity rule and related reporting requirements.  In addition, the staff has issued guidance intended to assist funds in complying with the liquidity rule’s requirements.  These actions are aimed at providing investors with accessible and useful information about liquidity risk management of the funds they hold while providing sufficient time for funds to implement the requirement to classify their holdings in an efficient and effective manner.

SEC Chair Jay Clayton. “As we move forward, the SEC staff will review quantitative liquidity disclosures and evaluate whether there are common quantitative metrics that allow for comparison across similarly situated funds that can and should be disclosed to investors and the market.  I look forward to the staff’s analysis.”

Investment Company Institute (ICI) President and CEO Paul Stevens issued the following statement: “ICI commends the SEC for recognizing the benefits of providing fund liquidity disclosure in narrative form. This represents a vast improvement over the original requirements. It will further promote investors’ understanding of funds’ liquidity risks and how funds manage them.”

Read the full release

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