On August 28, 2024, the Securities and Exchange Commission (“SEC”) adopted amendments to reporting requirements on Forms N-PORT and N-CEN that apply to certain registered investment companies, including registered open-end funds, registered closed-end funds, and unit investment trust (the “Amendments”).[1] In addition, the SEC provided guidance related to open-end fund liquidity risk management program requirements (“Guidance”).

The Amendments were part of larger proposed amendments to rules for open-end management investment companies regarding liquidity risk management programs and swing pricing that were proposed November 2, 2022. During the open meeting and in the Adopting Release, it was noted that the SEC was declining at this time to adopt the other proposed amendments that were made back in 2022 (including amendments to Rule 22e-4 and amendments to swing pricing rules), but they did not indicate if they plan to re-propose any of those aspects.

Amendments to Form N-PORT

The Amendments with respect to Form N-PORT require funds to file monthly reports on Form N-PORT, within 30 days after the end of the month to which they relate. This is a change from the current requirement to file monthly reports on Form N-PORT on a quarterly basis no later than 60 days after the end of the fiscal quarter. In addition, the information on Form N-PORT will be publicly available 60 days after the end of the month.[2] Under the current rules, only the report for the third month of every quarter is made public upon filing, which is 60 days after the end of that month. The Amendments also include certain other changes to Form N-PORT to align with the reports being filed monthly and being made publicly available.

Amendments to Form N-CEN

The Amendments with respect to Form N-CEN require funds that are subject to the liquidity rule (Rule 22e-4) to identify and provide certain information about service providers the fund uses to fulfill the requirements of that Rule. The Amendments also include changes related to entity identifiers. More specifically, a fund will be required to:

• name each liquidity service provider;
• provide identifying information, including the legal entity identifier, if available, and location, for each liquidity service provider;
• identify if the liquidity service provider is affiliated with the fund or its investment adviser;
• identify the asset classes for which that liquidity service provider provided classifications; and
• indicate whether the service provider was hired or terminated during the reporting period.

Staff Guidance on Liquidity Risk Management Program Requirements

The Adopting Release notes that, “while the [SEC] is not adopting amendments to the liquidity rule at this time, we are providing guidance for funds subject to the liquidity rule to address questions raised through outreach and monitoring.” The Guidance provided is with respect to the frequency of classifying the liquidity of fund investments, the meaning of “cash” in Rule 22e-4 and determining and reviewing highly liquid investment minimums (“HLIMs”).

Frequency of classification.

Rule 22e-4 requires funds to review liquidity classifications more frequently than monthly if changes in relevant market, trading, and investment-specific considerations are reasonably expected to materially affect one or more of the fund’s investment classifications. In the Adopting Release, it is noted that SEC staff has observed multiple instances where funds were not prepared to review classifications intra-month in response to changes in relevant market, trading, and investment-specific considerations. Rule 22e-4 requires funds to adopt and implement policies and procedures reasonably designed so that the funds can conduct the required intra-month review of liquidity classifications if such changes in relevant market, trading, and investment-specific conditions have occurred. The Guidance notes that such policies and procedures generally should identify, for example, the type of information a fund will use to identify relevant intra-month changes and to review liquidity classifications intra-month, as well as the timeliness of that information.

The Guidance refers registrants back to examples provided in the adopting release of Rule 22e-4 of changes in market, trading, and investment-specific considerations that funds may wish to consider.[3] The Guidance provides additional examples of cases where a funds generally should consider reviewing liquidity classifications if changes in portfolio composition are reasonably expected to materially affect one or more investment classifications – “[f]or example, if a fund substantially increases the size of its position in an investment, the fund may reasonably anticipate trading a larger size of that investment, which could materially and adversely affect the liquidity classification of that investment if a lack of market depth for a larger trade size makes it difficult to sell the investment within a particular time frame without the sale causing a significant change in market value.”

Meaning of cash

Under Rule 22e-4, the determination as to whether an investment can be classified as highly liquid or moderately liquid is based on the time in which the fund reasonably expects an investment to be “convertible to cash” (i.e., sold and settled) without significantly changing the market value of the investment. In the Adopting Release, the SEC reiterates its previous statements that the term “cash” in Rule 22e-4 means U.S. dollars and does not include foreign currencies or cash equivalents.

In the Guidance, the SEC notes that in classifying investments under Rule 22e-4, funds need to consider conversion to U.S. dollars when classifying an investment. In addition, non-U.S. dollar currencies are investments that would need to be classified considering conversion to U.S. dollars. The SEC notes that its staff have observed the following practices, which it does not believe are consistent with the Rule:

• some international funds consider the time in which an investment would be convertible to a different currency other than U.S. dollars as the relevant period for determining when an investment is convertible to cash, even though the funds pay cash redemptions in U.S. dollars;
• some funds classifying any currency as a highly liquid investment, regardless of the amount of time it would take to convert that currency to U.S. dollars, because the definition of highly liquid investment refers to cash.

The Guidance notes that when a fund is considering the time in which an international currency investment would be convertible to U.S. dollars, the fund would consider the amount of time it is reasonably expected to take to convert a reasonably anticipated trade size of that currency into U.S. dollars under current market conditions without significantly changing the currency exchange rate. It is noted that pertinent factors for these purposes generally include, for example, the presence of currency controls, the presence of an active market in forward or spot contracts exchanging the currency for U.S. dollars, and any delays in currency conversions driven by market structure or operations.

Additionally, when a fund is determining the time in which an international investment (other than an international currency) would be convertible to U.S. dollars, the fund generally should take into account two considerations:

1. reasonable expectations of the period of time in which an international non-currency investment can be sold and settled in the local market without significantly changing the market value of the investment; and

2. reasonable expectations of the period of time in which any international currency received upon settlement can be converted to U.S. dollars without significantly changing the currency exchange rate.

The Guidance provides more specific details on additional considerations that funds should make with determining how to classify international investments that are not in U.S. dollars.

Highly Liquid Investment Minimums

Rule 22e-4 requires funds that do not primarily hold assets that are highly liquid investments to have a HLIM. In the Guidance, the SEC staff notes that it is reiterating and highlighting certain of its previous guidance with respect to HLIMs.

• When considering a fund’s investment strategy and portfolio liquidity, a fund that invests significantly in less liquid or illiquid investments, such as a bank loan fund, generally should consider establishing a HLIM that is higher than that of a fund that is more liquid.
• Funds with investment strategies that have had greater volatility of flows than other investment strategies—or that are reasonably expected to have greater volatility in reasonably foreseeable circumstances—would generally need a HLIM that are higher than funds whose strategies tend to entail less flow volatility.
• While a line of credit or similar arrangement can facilitate a fund’s ability to meet unexpected redemptions and can be taken into consideration when determining its HLIM, liquidity risk management is better conducted primarily through construction of a fund’s portfolio.

The Guidance notes that “[w]hile the goal of the highly liquid investment minimum is to increase the likelihood that a fund will be better prepared to meet redemptions without significant dilution, [the staff is] not dictating how a portfolio manager meets redemptions.” What this means is that a fund should not only, or primarily, use its most liquid investments to meet shareholder redemptions.

The Guidance also notes that the HLIM requirement does not mean that a fund must continuously maintain a specific level of highly liquid assets and cannot use those assets to meet redemptions. The SEC staff reminds registrants that “the only consequence under Rule 22e-4 of a fund dropping below its HLIM is the triggering of the fund’s shortfall policies and procedures, which must include notifying the fund’s board of the shortfall at the board’s next regularly scheduled meeting or, if the shortfall continues for more than seven consecutive calendar days, notifying the board and filing a confidential report with the Commission on Form N-RN within one business day.”

Compliance Dates

The final amendments will become effective on November 17, 2025.

With respect to the Form N-PORT amendments, larger entities will be required to comply with the Form N-PORT amendments for reports filed on or after the November 17, 2025, effective date, and smaller entities will be required to comply with these amendments for reports filed on or after May 18, 2026.[4]

With respect to the Form N-CEN amendments, all funds will be required to comply with the amendments for Form N-CEN reports filed on or after November 17, 2025.