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GAO-17-270R 1 (2016-12-05)

handle is hein.gao/gaobadsxl0001 and id is 1 raw text is: G A O U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 B-328607 December 5, 2016 The Honorable Richard Shelby Chairman The Honorable Sherrod Brown Ranking Member Committee on Banking, Housing, and Urban Affairs United States Senate The Honorable Jeb Hensarling Chairman The Honorable Maxine Waters Ranking Member Comm ittee on Financial Services House of Representatives Subject: Securities and Exchange Commission: Investment Company Liquidity Risk Management Programs Pursuant to section 801 (a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Securities and Exchange Commission (the Commission) entitled Investment Company Liquidity Risk Management Programs (RIN: 3235-AL61). We received the rule on October 19, 2016. It was published in the Federal Register as a final rule on November 18, 2016. 81 Fed. Reg. 82,142. The rule has an effective date of January 17, 2017, except for the amendments to Form N-CEN, which are effective June 1, 2018. According to the Commission, the final rule imposes new requirements, adopts a new form, and amends an existing rule and forms designed to promote effective liquidity risk management throughout the open-end investment company industry, thereby reducing the risk that funds will be unable to meet their redemption obligations and mitigating dilution of the interests of fund shareholders. The Commission also seeks with this rule to enhance disclosure regarding fund liquidity and redemption practices. The rule requires each registered open-end management investment company, including open-end exchange-traded funds but not including money market funds, to establish a liquidity risk management program. The rule also requires principal underwriters and depositors of unit investment trusts to engage in a limited liquidity review. Further, the rule amends Form N-1A regarding the disclosure of fund policies concerning the redemption of fund shares. In addition, the rule generally will require a fund to confidentially notify the Commission when the fund's level of illiquid investments that are assets exceeds 15 percent of its net assets or when its highly liquid investments that are assets fall below its minimum for more than a specified period of time. Lastly, the rule will require disclosure of certain information regarding the liquidity of a fund's holdings and the fund's liquidity risk management practices. GAO-1 7-270R

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