SEC’s Proposed Modernized Reporting Regime: Effects on ETF Sponsors

by Dechert LLP

The U.S. Securities and Exchange Commission (SEC) on May 20, 2015 unanimously approved proposed rules, forms and amendments that are intended to modernize and enhance the reporting and disclosure of information by investment companies.1 The Proposal specifically cites the expansion of the exchange-traded fund (ETF) market as an example of how the asset management industry has grown more complex in recent years.2 Accordingly, the Proposal includes many new reporting and disclosure obligations that are applicable to ETFs.

This Dechert OnPoint provides a brief discussion of some of the key components of the Proposal and how they could affect ETF sponsors.3

New Reporting Requirements for ETFs

New Form N-PORT and the Rescission of Form N-Q

Form N-PORT would replace Form N-Q as a new portfolio holdings reporting form for registered investment companies. Under the Proposal, all investment companies, including ETFs, would be required to file reports on Form N‑PORT, regardless of whether they are organized as open-end management companies (as most ETFs are) or unit investment trusts. Form N-PORT would require investment companies to electronically file monthly (rather than quarterly under Form N-Q) portfolio investment information with the SEC in a structured data format, no less than 30 days after each month-end. Form N-PORT would require an investment company to report position-level information with respect to its underlying investments, including its securities lending, repurchase and reverse repurchase agreements. Further, Form N-PORT would require investment companies to report general information (such as total assets, liabilities and performance returns), and certain investment companies would be required to calculate and report risk metrics regarding investments in derivatives and debt instruments.

Form N-PORT would require investment companies offering multiple series to file separate reports for each series, even if such filings would be duplicative. Currently, under Form N-Q, individual series do not make separate filings and Form N-Q filings must only be filed within 60 days of the first and third quarters of an ETF’s fiscal year.

Amendments to Regulation S-X

The Proposal includes certain amendments to Regulation S-X, which prescribes the content and form of financial statements as reported in investment company registration statements and shareholder reports. Many of the proposed amendments to Regulation S-X are consistent with the enhanced reporting regime outlined in Form N-PORT. As is the case with all investment companies, the proposed amendments would require standardized derivatives disclosure to be included in an ETF’s financial statements.4 For example, the Proposal includes schedules on which ETFs would be required to report their investments in open futures contracts, open forward foreign currency contracts, and open swap contracts.5 Further, the Proposal would enhance existing disclosure requirements for purchased and written option contracts. Depending on the type of derivative instrument, the proposed schedules request information that includes a transaction’s notional amount, counterparty, delta and strike price, among other things. The Proposal would also require an ETF to disclose its derivatives exposure with greater prominence in the ETF’s financial statements, eliminating the ability of an ETF to disclose this information in the notes to financial statements.

Website Transmission of Shareholder Reports

The Proposal contains a new proposed Rule 30e-3 under the Investment Company Act of 1940, as amended (1940 Act), which would permit, but not require, investment companies to satisfy current shareholder report delivery obligations by making annual and semi-annual reports and certain other materials available on a publicly accessible website free of charge. Investment companies that choose to rely on the rule would need to comply with certain conditions relating to availability, shareholder consent and notice. Reliance on the rule would also require an investment company to send a paper copy of its most recent shareholder report to any requesting shareholder, within three business days of receiving such request.

New Form N-CEN and Rescission of Form N-SAR

Under the Proposal, Form N-CEN would replace Form N-SAR as the form on which ETFs report census-type information. The Proposal would require all ETFs to file reports on Form N-CEN in structured data format. As is the case with all other types of investment companies, ETFs would be required to complete the following portions of Form N-CEN:

  • Part A: information on the reporting period covered.
  • Part B: general background information on the registrant (e.g., name, address, location of books and records, central index key and legal entity identifier (LEI)).
  • Part C (not applicable to Small Business Investment Companies): general identifying information, including identifying information for individual series.
  • Part G: attachments to the filing (much like those currently required by Form N‑SAR).

Further, in the Proposal, the SEC stated that it believed it appropriate to “tailor some of the comprehensive information reporting requirements in proposed new Form N-CEN to the special characteristics of ETFs.” Part E of Form N-CEN requires the reporting of information specific to ETFs, including:

  • Identifying information about each of the ETF’s authorized participants (e.g., full name, SEC file number, CRD number, LEI if applicable, and dollar amounts purchased and redeemed during the reporting period).
  • Information on the ETF’s creation unit size (e.g., total value of creation units purchased and redeemed primarily in-kind and primarily with cash during the reporting period, as well as transaction fees charged).
  • Performance information as compared to an Index ETF’s benchmark.

As with proposed Form N-PORT, multiple series investment companies would need to file a separate Form N-CEN for each series. However, unlike Form N-SAR, which must be filed semi-annually, Form N-CEN would only have to be filed annually, 60 days after the end of an ETF’s fiscal year-end.

Potential Effect on ETF Sponsors

ETF sponsors will need to evaluate the additional compliance costs related to the Proposal, including with respect to incremental costs and burdens of reporting such information to the SEC. For instance, the new risk metric calculations and derivatives disclosures would certainly cause ETF sponsors to incur additional compliance costs. Moreover, ETFs would be subject to additional reporting requirements under Part E of Form N-CEN – beyond the requirements applicable to mutual funds. It would also become necessary for sponsors to adjust their recordkeeping so that they can easily report information required by the new forms. Certain sponsors may need to hire more staff to meet the additional administrative and compliance burdens. Further, the total costs attributable to the monthly filings required under Form N-PORT have the potential to be significant.

Overall, the Proposal, if finalized, would require ETF sponsors to build new reporting systems, thereby raising compliance costs. The exact scope of the burden remains uncertain, but the Proposal could be the SEC’s first step in its renewed focus on the ETF industry. The Proposal was followed by another SEC release seeking public comment on topics related to the listing and trading of exchange-traded products.6 The latter release also noted the rapid growth of the ETF market and sought information relating to the trading of ETFs generally. The SEC’s recent proposals may hint at increased regulatory scrutiny over the ETF sector, which may lead to future action.


1) Investment Company Reporting Modernization, Rel. No. IC-31610 (May 20, 2015) (Proposal).

2) See footnote 5 of the Proposal (noting that “[a]s of March 2015, there were over 1400 ETFs with over $2 trillion in assets. In the period of March 2014 to March 2015, assets of ETFs increased $352.43 billion or 20.6%.”).

3) For a detailed description of the substantive requirements included in the Proposal, please see Dechert OnPointU.S. SEC Approves Proposal to Modernize Investment Company Reporting Regime.

4) The SEC stated in the Proposal that it believes the amendments to Regulation S-X “will assist comparability among funds, and increase transparency for investors regarding a fund’s use of derivatives and the liquidity of certain investments.”

5) Currently, these types of investments are reported under Rule 12-13 of Regulation S-X (Investments other than securities). According to the Proposal, current financial statement disclosures under Rule 12-13 lack uniformity in both depth and scope, which can make it difficult for investors to understand the risks associated with an investment company’s derivatives holdings, both independently and in comparison to other investment companies.

6) See Request for Comment on Exchange-Traded Products, Rel. No. 34-75165 (June 12, 2015). For additional information regarding this release, please see Dechert OnPoint, U.S. SEC Seeks Public Comment on the Listing, Trading and Selling of Exchange-Traded Products.

Written by:

Dechert LLP

Dechert LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.