SEC Delays Fund Reporting Requirements

less information available to fund investors, said Benjamin Schiffrin, director of securities policy for Better Markets. “The commission really hasn’t yet explained why it is making the change,” he said. “Investors need timely disclosures so they can make better investment decisions… There’s just no indication the commission is accounting for how this is going to affect investors.”

The Securities and Exchange Commission recently proposed extending some reporting timeframes for mutual funds and certain ETFs from monthly to quarterly, sending a clear message to asset managers. Additionally, the agency seems poised to reverse a 2024 update to the Names Rule, enacted in part to combat greenwashing in the industry. Compliance dates for reporting rules revised during the Biden administration were extended last year, with notices issued last week pushing them out as far as mid-2028.

SEC Chairman Paul Atkins highlighted that the proposal offers registrants more time to file forms, refines reporting items, and decreases the frequency of public reporting of fund portfolio holdings while still maintaining insight into portfolio-related concerns. Former Commissioner Caroline Crenshaw, a strong advocate for the update to the names rule, drew inspiration from “20th-century philosopher Theodor Geisel [Dr. Seuss]”, emphasizing the importance of clarity and transparency.

Until the 2023 update, the SEC required 80% of holdings to align with a fund’s name, particularly if the name implied a specific focus. The revised rule expanded this requirement to include more fund categories, especially those claiming to adhere to environmental, social, and governance standards. Crenshaw likened the necessity of the update to consumers needing an ingredient list on a jar of peanut butter, as there may be more than just peanuts in the product. Fund companies have been adapting to the SEC’s new Form N-PORT requirements, which reduced the timeframe for funds to report holdings data to the SEC and changed public reporting from quarterly to monthly.

The recent proposal now gives funds an extended deadline of 45 days from the end of the month to report, instead of the previous 30 days. It aims to streamline reporting items, including adjustments to portfolio-level risk metrics and return information, and the removal of certain reporting requirements. Corey Rose, a partner at Dechert, expressed that the industry welcomes these changes, especially given the technical hurdles faced by fund groups. It appears that the SEC is anticipating issuing a final rule to eliminate these requirements altogether.

However, Benjamin Schiffrin from Better Markets raised concerns about the impact of these changes on investors, noting that they will result in less information being available. He emphasized that the commission has not adequately explained why these changes are being made, highlighting the importance of timely disclosures for investors to make informed investment decisions. Ultimately, there is uncertainty about how these adjustments will affect investors and whether the SEC has taken their interests into account.