If It’s New It’s Worrying; If It’s News It’s Really Worrying

There are three reasons sub-advisers need to catch up fast on N-PORT:

  1. Someone else’s regulation has become YOUR problem

We’ve come across this issue many times over the past few years but it’s becoming more noticeable that whatever the direction of regulation, no matter who the intended target, there are plenty of companies indirectly affected. No more so than when data is a key part of the regulatory mix; because financial product sponsors outsource many of their services when reporting on those aspects of their operations the regulated company needs data from its delegates.

And so it is with SEC Fund Modernization. While the rules are aimed very much at mutual fund sponsors, the reach strays well into other territories, most notably into the sub-advisory community. When a fund sponsor uses a delegate to sub-advise on a fund, or portion of a fund, or indeed where the sponsor is using an affiliate management firm, the adviser running the mandate will have to make their data available as cleanly and timely as if they were a regulated entity themselves. Do sub-advisers have a choice here? Of course they do, but opting out of their Form N-PORT obligations means losing the mandate.

  1. The burden on sub-advisers is significant

The breadth of information that sub-advisers are required to provide is substantial. We’re talking liquidity, portfolio and risk data, all provided on the same monthly basis that regulated firms have to follow. Where that adviser or affiliate does not operate their own 40 Act fund(s), this problem becomes even more acute. To many sub-advisers, who work in the institutional space or operate outside of the US, this effort will be new to them. What’s more worrying is that it might also be NEWS to them – if it is then the work has to start right now. Fund companies are working on their test data from as early as November. To meet the needs of the mutual fund client, the sub-adviser is likely to require outside help in making sure the collection and delivery of Form N-PORT data is as smooth and efficient as possible, and fits in with the fund’s filing preparation time frame.

  1. Collecting data from multiple sources isn’t easy

We’re experts on dealing with data for financial firms – even more so when that data is applied to regulation. Regulatory data needs to be filed on time to the SEC in the correct format, no ifs, no buts. The hurdle for those regulated firms when compiling their data is that is comes in from a range of sources – many mutual fund sponsors could be dealing with 10 or more sub-advisers, each compiling the data in their own particular format in their own time. It’s quite clear that the system as outlined here isn’t going to work.

We strongly advise mutual fund sponsors to establish a separate project stream focused on ensuring the data arriving from outside the business is delivered in the desired format and timeframe. Our preference is for fund companies to get outside help from data experts who can ensure that all data, both external and internal, is fed into the same central repository, so that it can be extracted in a consistent fashion, ready for delivery to the SEC.

For more information on how Accudelta can help with fund sponsor and sub-adviser Form N-PORT preparations, please contact us.


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CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.

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