SEC has voted to for funds to report portfolio holdings on a monthly basis instead of 4 times a year

Wall Street's top regulator approved new rule changes on Wednesday that will require mutual funds and exchange-traded funds (ETFs) to report their portfolio holdings monthly instead of quarterly, aiming to improve transparency for investors. However, the U.S. Securities and Exchange Commission (SEC) backed away from pursuing more controversial "swing pricing" rules due to strong industry opposition. Instead, the SEC offered guidance on how to comply with existing liquidity risk management rules.

The SEC's five-member commission voted 3-2 along party lines to pass the new measures, with Republican members arguing that the costs of the changes would outweigh the benefits for market participants and investors. SEC Chair Gary Gensler emphasized that more frequent reporting would help investors track their holdings, avoid redundant investments, and give the SEC better oversight during periods of market volatility.

“The last few years have shown us how markets can be disrupted by events like the COVID-19 pandemic, international conflicts, and major bank collapses,” Gensler said in prepared remarks.

Under current rules, funds report their portfolios quarterly, with the data made public 60 days after the end of each quarter. Investors currently only receive information for the final month of each quarter. With the new amendments, funds must file their reports within 30 days of each month’s end, with the data being made public 30 days after filing.

Republican Commissioner Hester Peirce expressed concerns that the SEC did not allow enough time for public input on the changes and that their benefits would be limited, noting that the SEC would still need to wait 30 days for reports during times of market stress.

The updated regulations are set to take effect in November 2024, with smaller funds (those with $1 billion or less in net assets) having until May 2026 to comply.

In addition, the SEC issued guidance on existing rules that require open-end funds to manage liquidity risk, allowing investors to redeem shares on a daily basis. Previously proposed "swing pricing" rules, aimed at helping funds manage market stress by shifting the cost of sudden redemptions to those who sell out, will be revised after industry pushback.

The guidance issued Wednesday clarifies how often open-end funds should assess their assets’ liquidity and review their minimum holdings of highly liquid investments, providing more clarity on compliance with the current regulations.