Understanding the Impact of the SEC’s Form N-PORT Delay

Originally published May 2018

The SEC recently announced its decision to postpone the first Form N-PORT filing on its EDGAR system by nine months.

The original compliance date — June 1, 2018 — remains the same, and fund groups must still satisfy the new reporting obligations by maintaining records with the information required for Form N-PORT. The only change is that fund groups will now wait until April 2019 to make the first filing to the EDGAR system.

The first filing will require data collected as of March 31, 2019, and will be due on or before April 30, 2019. However, if the SEC asks a fund group to provide Form N-PORT records from the period between June 30, 2018 and April 2019, they must be ready to hand the Form N-PORT records over.

Although this delay doesn’t offer much relief in terms of compliance preparation time, what it does provide is the chance for a lengthy dress rehearsal before the first official submission of the new data to the SEC.

SEC to strengthen its security

The SEC’s decision to delay the first Form N-PORT filing was rooted in concerns over the agency’s cybersecurity defenses. It recently came to light that the EDGAR system was breached in 2016, and personal information — such as Social Security numbers — was compromised by the hack.

The call for enhanced security at the SEC has only intensified, as some of the data required under the new Form N-PORT is sensitive. In addition to the SEC’s desire to bolster its security defenses, there were concerns that the agency’s system might not be designed to handle the sheer volume of the new data required under Forms N-PORT and N-CEN.

The Investment Company Institute — acting on behalf of the industry — spent months soliciting the SEC to postpone the first EDGAR filing so the SEC could ensure that it was prepared, in terms of both security protection and system capabilities.

ArcFiling: a valuable preparation tool

Brian Lynch, vice president of product management at DFIN, says the team behind ArcFiling is “full steam ahead,” despite the announcement by the SEC. While ArcFiling was fully prepared to begin filings in June 2018, he points out that the SEC’s postponement “will allow clients to submit many test filings and get familiar with the XML format and schema.”

He adds that it’s “extremely valuable” for clients to be able to use ArcFiling as a single source for their data.

Jay Nusblatt, managing director of sales and business development at DFIN, adds that clients can see the benefits of using the ArcFiling technology and service beginning on the date of compliance. Even though users won’t be filing the information to the SEC at that time, the platform will act as a way to gather, validate and archive the required information.

“If the SEC does eventually call on a fund group to ask for Form N-PORT records, the client could simply pull the report for the 30-day period — already in the preferred XML format — out of ArcFiling and submit it immediately,” he explains.

Sean Harrington, director of content management solutions at DFIN, says the nine-month period between compliance and the first filing will allow fund groups to test and measure their speed and comfort with the new Form N-PORT requirements without the pressure of actually filing on time.

DFIN experts agree that the SEC delays offer a real opportunity for firms to work on readiness and process improvement before the filing date. As an added silver lining, this also gives DFIN an opportunity to incorporate client working group feedback into ArcFiling releases prior to the filing date. 

THE NEW SEC MODERNIZATION MILESTONES

Form N-PORT
  • June 1, 2018: Form N-PORT compliance date for >$1 billion in net assets.
  • Dec. 1, 2018: Liquidity compliance date for >$1 billion in net assets.
  • April 30, 2019: First Form N-PORT EDGAR filing.
  • June 1, 2019: Form N-PORT compliance date for <$1 billion in net assets.
  • Sept. 30, 2019: First liquidity information included in filing for >$1 billion in net assets.
  • April 30, 2020: Form N-PORT filing date and liquidity filing date for <$1 billion in net assets.
Form N-CEN
  • June 1, 2018: Form N-CEN compliance date.
Form N-Q
  • Due to the delay, fund companies should continue to file Form N-Q until Form NPORT-EX filings begin after March 31, 2019.