Gary Gensler’s tenure as SEC chair can be remembered for an impressive number of rule proposals, many of which encountered vehement industry opposition or were challenged in court, struck down, or stayed.
One of Gensler’s more controversial and costly rule proposals would have mandated the use of “swing pricing” by mutual funds, imposed a “hard close” at 4 p.m. each day, and amended Rule 22e-4 under the Investment Company Act (the mutual fund liquidity rule). Following strong opposition to the proposal, the SEC determined in August 2024 not to move forward with its swing pricing and hard close proposal.
Instead, the SEC adopted amendments to Form N-PORT that require open-end funds, closed-end funds, and exchangetraded funds organized as unit investment trusts to report portfolio holdings to the SEC monthly (instead of quarterly). The amendments also require funds to make portfolio holding reports available to the public 60 days after the end of each month (instead of every third month). The effective date for the new N-PORT reporting requirements is November 17, 2025, or six months later, May 18, 2026, for entities with net assets of less than $1 billion.
The new portfolio holding reporting frequency rule has encountered opposition on both procedural and substantive grounds. Republican Commissioners Hester Peirce and Mark Uyeda opposed the N-PORT amendments, with Peirce dubbing them “too short to report,” because the SEC gave “too little attention to the costs, perhaps because the Commission failed genuinely to seek needed public input on these changes.”
The day after the SEC adopted N-PORT amendments, the Registered Funds Association (a trade group recently formed in Texas) sued the SEC in the Fifth Circuit seeking to overturn the new requirements. The complaint alleges that the “amendments would impose great harm by limiting an investment company’s ability to benefit from the proprietary work product of its investment adviser. ... In effect, the amendments force funds to make their intellectual capital available to the public for free.”
The case is tentatively scheduled for oral argument the week of March 31, 2025. Challenges to SEC rules have been having pretty good success in the Fifth Circuit lately. Moreover, the new Republican majorities in the SEC or in Congress may see fit to reverse these amendments, especially because their compliance dates are still a good ways off. Very possibly, therefore, the SEC’s adoption of these new N-PORT reporting requirements will be reversed.
