service providers, fees and expenses, portfolio strategies and
investments, portfolio transactions, and share transactions. Funds
generally must file reports on Form N-SAR semi-annually, except for
UITs, which file annually.\364\ By contrast, as discussed further
below, we are proposing to have all funds file reports on Form N-CEN
annually.\365\
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    \363\ We are proposing to rescind Form N-SAR and replace it with
a new census reporting form, Form N-CEN, rather than to amend Form
N-SAR in order to avoid technical difficulties that could arise with
filing reports on an amended Form N-SAR (e.g., difficulties related
to changes to filing format and form specifications).
    \364\ See rules 30b1-1 and 30a-1.
    \365\ See proposed amendments to rule 30a-1.
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    In recent years, Commission staff has found that the utility of the
information reported on Form N-SAR has become increasingly limited. We
believe there are two primary reasons for this limited utility. First,
in the past two decades, we have not substantively updated the
information reported on the form to reflect new market developments,
products, investment practices, or risks. Second, the technology by
which funds file reports on Form N-SAR has not been updated and limits
the Commission staff's ability to extract and analyze the data
reported. Accordingly, we believe that by updating the content and
format requirements for census reporting, as discussed below, the
Commission will be better able to carry out its regulatory functions,
while at the same time reducing burdens on filers.
    Proposed Form N-CEN would gather similar census information about
the fund industry that funds currently report on Form N-SAR, which
could be aggregated and analyzed by Commission staff to better
understand industry trends, inform policy, and assist with the
Commission's examination program. However, in order to improve the
quality and utility of information reported, proposed Form N-CEN would
streamline and update information reported to the Commission to reflect
current Commission staff information

needs and developments in the industry.\366\ Additionally, where
possible, we have endeavored to exclude items from proposed Form N-CEN
that are disclosed or reported pursuant to other Commission forms, or
are otherwise available; however, in some limited cases, we are
proposing to collect information that may be similarly disclosed or
reported elsewhere, but that the staff would benefit from collecting in
a structured format.
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    \366\ We are proposing to streamline our data collection, in
part, through the use of yes/no questions in order to flag certain
information for follow-up, if necessary, by Commission staff. See,
e.g., Item 11 and Item 30.a of proposed form N-CEN. For example,
staff of our Office of Compliance Inspections and Examinations may
rely on responses to flag questions in Form N-CEN to indicate areas
for follow-up discussion or to request additional information.
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    In order to improve the utility of the information reported to the
Commission, we are also proposing that reports on Form N-CEN be
structured in an XML format.\367\ By requiring reports on Form N-CEN to
be filed in XML format, filers will no longer be required to use
outdated technology for census reporting. Additionally, requiring
reports on Form N-CEN to be filed in an updated structured format will
allow reported information to be more efficiently and effectively
validated, retrieved, searched, and analyzed through automated means
and, therefore, more useful to end users.\368\
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    \367\ The Commission has adopted a number of other forms that
are structured in an XML format, including Form N-MFP. Reports on
Form N-SAR, by contrast, are filed with an outdated filing
application.
    \368\ See supra Part II.A.3 (discussing benefits to the use of
XML for reports on Form N-PORT).
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2. Who Must File Reports on Form N-CEN
    We are proposing to require that all registered investment
companies, except face amount certificate companies,\369\ file reports
on Form N-CEN.\370\ Funds offering multiple series would be required to
report information in Part C of the form as to each series separately,
even if some information is the same for two or more series.\371\
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    \369\ Face-amount certificate companies are investment companies
which are engaged or propose to engage in the business of issuing
face-amount certificates of the installment type, or which have been
engaged in in such businesses and have any such certificates
outstanding. See section 4(1) of the Investment Company Act [15
U.S.C. 80a-4(1)]. Face amount certificate companies are not
currently required to file reports on Form N-SAR. See General
Instruction A to Form N-SAR. Face amount certificate companies would
continue to file periodic reports pursuant to section 13 or section
15(d) of the Exchange Act.
    \370\ See proposed amendments to rule 30a-1. Consistent with
Form N-SAR, BDCs, which are not registered investment companies,
would not be required to file reports on Form N-CEN.
    \371\ Proposed General Instruction A. Unlike Form N-PORT where
separate reports would be filed for each series, registrants would
file one report on Form N-CEN covering all series (as is currently
done with reports on Form N-SAR). We are proposing this framework
for Form N-CEN to help minimize reporting burdens, as much of the
information that would be required by Form N-CEN (for example, the
information reported pursuant to Parts A and B) would be the same
across a fund's various series. We note that Form N-SAR's approach
to series information is slightly different than that of proposed
Form N-CEN, in that Form N-SAR allows registrants to indicate
instances where the information is the same across all series,
rather than requiring repetitive information. See General
Instruction D(8) of Form N-SAR. Unlike Form N-SAR, however, we have
sought to organize the information requested in proposed Form N-CEN
so that information that is the same for all series is reported in
Parts A and B of the form, with Part C, the part of the form that
requires each series to respond separately, requesting information
that is more likely to differ between series. Accordingly, we
anticipate the need to report repetitive information should be
limited.
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    Like Form N-SAR, the sections of Form N-CEN that a fund is required
to complete would depend on the type of registrant in order to better
tailor the disclosure requirements.\372\ All funds would be required to
complete Parts A and B, and file any attachments required under Part G.
In addition, funds would complete the following Parts as applicable:
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    \372\ See General Instruction A (Rule as to Use of Form N-CEN)
to proposed Form N-CEN. As reflected in General Instruction A,
registrants would be required to respond to each item in their
required sections. To the extent an item in a required section is
inapplicable to a registrant, the registrant would respond ``N/A''
to that item. Registrants would not, however, have to provide
responses to items in sections they are not required to fill out.
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     All management companies, other than SBICs, would complete
Part C;
     closed-end funds and SBICs would complete Part D;
     ETFs (including those that are UITs) would complete Part
E; \373\ and
---------------------------------------------------------------------------

    \373\ Certain investment products known as ``exchange-traded
managed funds'' would also be required to complete Part E: of
proposed Form N-CEN.
---------------------------------------------------------------------------

     UITs would complete Part F.\374\
---------------------------------------------------------------------------

    \374\ Management companies that are registered on Form N-3 would
also complete certain items in Part F as directed by Item 7.c.i of
proposed Form N-CEN. See General A to proposed Form N-CEN.
---------------------------------------------------------------------------

    We request comment on who must file Form N-CEN.
     Should we require any other types of investment companies
to file reports on Form N-CEN? For example, should face-amount
certificate companies be required to file reports on Form N-CEN?
     Should funds offering multiple series be required to file
a report for each series separately, rather than one report covering
multiple series, as proposed?
3. Frequency of Reporting and Filing Deadline
    Management investment companies currently file reports on Form N-
SAR semi-annually,\375\ and UITs file such reports annually.\376\ To
reduce reporting burdens, we are proposing that reports on Form N-CEN
be filed annually, regardless of type of filer.\377\ Form N-CEN would
require census-type information, which in our experience does not
change as frequently as, for example, portfolio holdings information.
Accordingly, we believe that an annual filing requirement would be
sufficient for purposes of review by Commission staff, as well as
investors and other market participants that might use this
information.\378\
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    \375\ See rule 30b1-1.
    \376\ See rule 30a-1.
    \377\ See proposed amendments to rule 30a-1.
    \378\ As discussed above, certain items that are currently
reported on Form N-SAR that would be helpful to have updated on a
more frequent basis would be moved to proposed Form N-PORT. For
example, item 28 of Form N-SAR requires the fund to provide its
monthly sales and repurchases of the Registrant's/Series' shares. In
order to increase the timeliness of the information reported to the
staff for funds flows, certain information relating to monthly flows
would be reported on item B.6 of proposed Form N-PORT, if adopted.
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    We are proposing a filing period of 60 days after the end of the
fiscal year for funds to file reports on Form N-CEN.\379\ This is the
same filing period that management companies currently have to file
reports on Form N-SAR.\380\ As with Form N-SAR, and having considered
the amount and nature of the information that would be requested in
proposed Form N-CEN, we continue to believe that a sixty-day filing
period would appropriately balance the staff's need for timely
information against the time necessary for a fund to collect, verify,
and report the required information to the Commission.
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    \379\ Management companies are currently required to file Form
N-SAR reports no more than 60 days after the close of their fiscal
year and fiscal second quarter. See rule 30b1-1 under the Investment
Company Act [17 CFR 270.30b1-1]. Accordingly, we anticipate that
management companies, which would constitute the largest number of
funds filing reports on proposed Form N-CEN, generally will already
have processes in place for reporting census-type information at the
end of their fiscal years. Thus, we believe requiring reports on
proposed Form N-CEN after the close of a fund's fiscal year, rather
than calendar year, would be the least burdensome approach for most
funds.
    \380\ See rule 30b1-1 under the Investment Company Act [17 CFR
270.30b1-1]; but see rule 30a-1 under the Investment Company Act [17
CFR 270.30a-1] (requiring UITs to file annual reports on Form N-SAR
no more 60 days after the close of the calendar year).
---------------------------------------------------------------------------

    Rule 30b1-3 under the Investment Company Act currently requires a
fund to file a transition report on Form N-SAR when a fund's fiscal
year

changes.\381\ Because reports on Form N-CEN would be filed annually
rather semi-annually, we believe that a rule outlining the requirements
for a transition report would no longer be necessary as transition
report filing requirements for fiscal year changes involve less
complexity in the case of reports required to be filed once a year
rather than twice a year. Consequently, we are proposing to rescind
rule 30b1-3. We are, however, proposing to require that reports on Form
N-CEN not cover a period of more than 12 months.\382\ Thus, if a fund
changes its fiscal year, a report filed on Form N-CEN may cover a
period shorter than 12 months, but would not be permitted to cover a
period longer than 12 months or a period that overlaps with a period
covered by a previously filed report.\383\
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    \381\ See rule 30b1-3.
    \382\ See General Instruction C of proposed Form N-CEN.
    \383\ Id.
---------------------------------------------------------------------------

    In addition, a fund would be able to file an amendment to a
previously filed report on proposed Form N-CEN at any time, including
an amendment to correct a mistake or error in a previously filed
report.\384\ A fund that files an amendment to a previously filed
report on the form would provide information in response to all items
of Form N-CEN, regardless of why the amendment is filed.\385\
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    \384\ See General Instruction E of proposed Form N-CEN. Pursuant
to section 34(b) of the Investment Company Act, we expect that funds
would correct a material mistake in a Form N-CEN report by filing an
amendment to that report.
    \385\ Id.
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    We request comment on the proposed frequency of reporting and
proposed reporting deadline:
     Should reports on Form N-CEN be filed more frequently than
annually, as proposed? Should we require management companies to file
reports on Form N-CEN semi-annually and UITs to file reports annually,
as is currently required by Form N-SAR? Are certain information items
on Form N-CEN of a nature that they may change frequently or such that
more frequent information about them should be reported to the
Commission? If so, should any information items in proposed Form N-CEN
be reported on proposed Form N-PORT or another form instead? If so,
what items and on which forms?
     Consistent with the treatment of Form N-SAR filings for
management companies, we are proposing that reports be filed 60 days
after the end of the fund's fiscal year. Should we require a different
filing period? If so, what period should we require and why? How long
would it take funds to collect, verify, and file reports covering the
information required by proposed Form N-CEN? Would the burdens
associated with reports on proposed Form N-CEN be greater or less than
those associated with reports on Form N-SAR?
     We have proposed that reports on Form N-CEN be filed as of
the end of the fund's fiscal year. We understand that funds have other
filing requirements that are tied to their fiscal-year end. Should we
require some other period end date, such as end of calendar year?
Should UITs be required to file reports as of the end of their fiscal
year, as proposed, or should they file reports as of the end of their
calendar year as they currently do with reports on Form N-SAR?
     We are proposing to eliminate rule 30b1-3 under the
Investment Company Act. Should we instead retain the rule? Are the
general instructions to Form N-CEN, as proposed, sufficiently clear as
to the filing requirements when a fund changes its fiscal year end? If
not, how should the general instructions be revised, or in the
alternative, should a transition period rule be provided in connection
with Form N-CEN? If so, how should a transition period be defined and
what deadlines or timeframes should such a rule address?
     Should a fund be required to file an amendment to its Form
N-CEN report or file a current report within a certain period of time
if previously reported information changes? If so, what types of
changes should trigger an amendment requirement? What filing period
should be required for such an amendment requirement?
4. Information Required on Form N-CEN
a. Part A--General Information
    Part A of Form N-CEN, which would be completed by all funds, would
collect information about the reporting period covered by the report.
It would require funds to report the fiscal-year end date and indicate
if the report covers a period of less than 12 months.\386\
---------------------------------------------------------------------------

    \386\ Item 1 of proposed Form N-CEN.
---------------------------------------------------------------------------

    We request comment on the information items proposed to be reported
in Part A.
b. Part B--Information About The Registrant
    Part B of Form N-CEN, which would also be completed by all funds,
would require certain background and other identifying information
about the fund. In the case of funds offering multiple series, if the
response to an item in Part B of the form differs between series, the
fund would be instructed to provide a response for each series, as
applicable, and label the response with the name and series
identification number of the series to which a response relates.\387\
This background information would allow the staff to quickly categorize
filers by fund type and will assist with our oversight of funds.
---------------------------------------------------------------------------

    \387\ See Instruction to Part B: of proposed Form N-CEN.
---------------------------------------------------------------------------

    Included in this background information would be the fund's
name,\388\ Investment Company Act filing number,\389\ and other
identifying information, such as its CIK \390\ and LEI.\391\ In
addition, the form would require the fund's address, telephone number,
and public Web site (if any),\392\ and the location of the fund's books
and records.\393\ While the fund's name, address, and filing number are
currently required by Form N-SAR,\394\ some of the additional
information, such as the fund's CIK, LEI, public Web site and location
of books and records would be new. As discussed in the Form N-PORT
section above, information such as the CIK and LEI would assist the
Commission with organizing the data received by the Commission and
allow the staff to cross-reference the data reported on Form N-CEN with
data received from other sources.\395\ For tracking purposes, the
proposed form would require information relating to whether the filing
was the initial or final filing.\396\
---------------------------------------------------------------------------

    \388\ Item 2.a of proposed Form N-CEN.
    \389\ Item 2.b of proposed Form N-CEN.
    \390\ Item 2.c of proposed Form N-CEN.
    \391\ Item 2.d of proposed Form N-CEN; see also supra note 43
(discussing comment letters received on the FSOC Notice supporting
the use of LEIs).
    \392\ Item 3 of proposed Form N-CEN.
    \393\ Item 4 of proposed Form N-CEN.; see also infra notes 397-
399 and accompanying text.
    \394\ Items 1 and 2 of Form N-SAR.
    \395\ See supra Part II.A.2.a. As discussed above, commenters to
the FSOC Notice expressed support for the regulatory acceptance of
LEI identifiers. See supra note 43.
    \396\ Item 5 of proposed Form N-CEN.
---------------------------------------------------------------------------

    As discussed above, funds would be required to include the location
of their books and records in reports on proposed Form N-CEN. We note
that books and records information is currently required by fund
registration forms; \397\ however, this information is not filed with
us in a structured format. We believe that having books and records
information in a structured format would increase our efficiency in
preparing for exams as well as our ability to identify current industry
trends and practices and, thus, we are

proposing to include this information in proposed Form N-CEN.\398\ In
addition, so as not to create unnecessary burdens, we are proposing to
amend Forms N-1A, N-2, N-3, N-4, and N-6 to exempt funds from those
forms' respective books and records disclosure requirements if the
information is provided in a fund's most recent report on proposed Form
N-CEN.\399\
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    \397\ See Item 33 of Form N-1A, Item 32 of Form N-2, Item 36 of
Form N-3, Item 30 of Form N-4, and Item 31 of Form N-6.
    \398\ Additionally, by including books and records information
in Form N-CEN, we may receive more frequently updated books and
records information from closed-end funds. Closed-end funds do not
update their registration statements as regularly as open-end funds
and, thus, the information regarding their books and records may not
always be up-to-date.
    \399\ Funds that have not yet filed a report on proposed Form N-
CEN would have to continue to include this information in their
registration statement filings.
---------------------------------------------------------------------------

    Similar to Form N-SAR,\400\ Form N-CEN would require information
regarding whether the fund is part of a ``family of investment
companies.'' The form, which would include a substantially similar
definition as Form N-SAR,\401\ would define a ``family of investment
companies'' to mean, except with respect to insurance company separate
accounts, any two or more registered investment companies that (i)
share the same investment adviser or principal underwriter; and (ii)
hold themselves out to investors as related companies for purposes of
investment and investor services.\402\ This item would assist
Commission staff with analyzing multiple funds across the same family
of investment companies.
---------------------------------------------------------------------------

    \400\ Items 19, 94 and 116 of Form N-SAR; see also General
Instruction H of Form N-SAR (defining ``family of investment
companies'').
    \401\ See id.; see also instruction 1 to Item 17 of Form N-1A.
    \402\ Instruction to Item 6 of proposed Form N-CEN. The
instruction, like the definition of ``family of investment
companies'' in Form N-SAR, would also clarify that insurance company
separate accounts that may not hold themselves out to investors as
related companies (products) for purposes of investment and investor
services should consider themselves part of the same family if the
operational or accounting or control systems under which these
entities function are substantially similar. See General Instruction
H to Form N-SAR.
---------------------------------------------------------------------------

    Similar to Form N-SAR, proposed Form N-CEN would also require the
fund to provide its classification (e.g., open-end fund, closed-end
fund).\403\ In addition, unlike Form N-SAR, the proposed form would
specifically ask whether the fund issues a class of securities
registered under the Securities Act.\404\ These questions are intended
to elicit background information on the fund, which will assist us in
our monitoring and oversight functions (for example, identifying those
funds that have not issued securities registered under the Securities
Act).
---------------------------------------------------------------------------

    \403\ Item 7 of proposed Form N-CEN; see also Items 5, 6, 27,
58, 59 and 117 of Form N-SAR. If the registrant is an open-end fund,
proposed Form N-CEN would also require information on the total
number of series of the registrant and, if a series of the
registrant was terminated during the reporting period, information
regarding that series. Item 7.a.i-Item 7.a.ii of proposed Form N-
CEN. In addition, registrants that indicate they are management
companies registered on Form N-3 are directed by Item 7 to respond
to certain additional items in Part F of the form that relate to
insurance company separate accounts. Item 7.c.i of proposed Form N-
CEN.
    \404\ Item 8 of proposed Form N-CEN.
---------------------------------------------------------------------------

    Under proposed Form N-CEN, a management company would report
information about its directors, including each director's name,
whether they are an ``interested person'' (as defined by section
2(a)(19) of the Investment Company Act), and the Investment Company Act
file number of any other registered investment company for which they
serve as a director.\405\ Although this information is reported in a
management company's Statement of Additional Information and provided
in annual reports to shareholders, providing this information to the
Commission in a structured format will allow the Commission and other
potential users to sort and analyze the data more efficiently.\406\ In
addition, the fund would be required to provide the chief compliance
officer's (``CCO's'') name, CRD number (if any), address, and phone
number,\407\ as well as indicate if the CCO has changed since the last
filing.\408\ If the fund's CCO is compensated or employed by any person
other than the fund, or an affiliated person of the fund, for providing
CCO services, the fund would also be required to report the name and
Employer Identification Number of the person providing such
compensation.\409\ Although some funds provide information relating to
their CCO in their registration statements, not all funds do.\410\ This
new requirement would provide staff with information on all fund CCOs
and would allow the staff to contact a fund's CCO directly.
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    \405\ Item 9 of proposed Form N-CEN.
    \406\ See, e.g., Items 17 and 27(b)(5) of Form N-1A.
    \407\ Because we expect that funds will provide the CCO's direct
phone number in response to this information request, the CCO's
phone number would be a non-public field in all Form N-CEN filings.
    \408\ Item 10 of proposed Form N-CEN.
    \409\ Item 10.j of proposed Form N-CEN.
    \410\ See, e.g., Item 17 of Form N-1A (requesting information
regarding fund officers). For example, Form N-1A defines the term
``officer'' to mean ``the president, vice-president, secretary,
treasurer, controller, or any other officer who performs policy-
making functions.'' It is our understanding that in some fund
complexes, the CCO does not fit within the category of officers
covered by this definition (i.e., the CCO does not perform a policy-
making function), and therefore, information as to their CCO is not
provided pursuant to the item.
---------------------------------------------------------------------------

    Part B would also include an item regarding matters that have been
submitted to a vote of security holders during the relevant
period.\411\ Information regarding submissions of matters to a vote of
securities holders is currently reported in Form N-SAR by management
companies in the form of an attachment with multiple reporting
requirements.\412\ In order to alleviate the burden on filers, we are
proposing to reduce the information to be reported regarding votes of
security holders to a yes/no question that is primarily meant to allow
staff to quickly identify funds with such votes, so that they can
follow up as appropriate, such as by reviewing more detailed
information required by other filings.\413\ Like Form N-SAR, the
proposed form would also include an item relating to material legal
proceedings during the reporting period.\414\
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    \411\ See Item 11 of proposed Form N-CEN.
    \412\ See Item 77.C of Form N-SAR; see also Instruction to
Specific Items for Item 77C.
    \413\ This information request would apply to UITs as well as
management companies. The Form N-SAR requirement applies only to
management companies. See id. We believe it is important for the
Commission to have information for all registered investment
companies on matters submitted for security holder vote in order to
assist us in our oversight and examination functions.
    \414\ Item 12 of proposed Form N-CEN. As in Form N-SAR Item
77.E, if there were any material legal proceedings, or if a
proceeding previously reported had been terminated, the registrant
would file an attachment as required by Part G: Of proposed Form N-
CEN. See Item 79.a.i of proposed Form N-CEN. We note that Form N-
CEN, unlike Form N-SAR, would require UITs to respond to the
information request related to material legal proceedings. For the
same reasons discussed above with respect to matters submitted for
security holder vote, we believe it is important to have information
on material legal proceedings of all registered investment
companies. See supra n.413.
---------------------------------------------------------------------------

    Form N-SAR currently requires management companies to report a
number of data points relating to fidelity bond and errors and
omissions insurance policy coverage.\415\ In order to limit the number
of items to those most useful to the Commission staff and reduce
burdens on filers, we are proposing to limit this request to two
separate items in Form N-CEN. One item would ask if any claims were
filed under the management company's fidelity bond and the aggregate
dollar amount of any such claims.\416\ The other item would ask if the
management company's officers or directors are covered under any
directors and officers/errors and omissions insurance policy and, if
so, whether any claims were filed under the policy during the

reporting period with respect to the registrant.\417\ These questions
will help alert Commission staff to insurance claims made by the fund
or its officers and directors as a result of legal issues related to
the fund.\418\
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    \415\ Form N-SAR Items 80-85 and 105-110.
    \416\ Item 13 of proposed Form N-CEN; cf. Item 83 of Form N-SAR.
    \417\ Item 14 of proposed Form N-CEN; cf. Item 85 of Form N-SAR.
    \418\ For example, a fund is required to provide and maintain a
fidelity bond against larceny and embezzlement, which in general
covers each officer and employee of the fund who has access to
securities or funds. See rule 17g-1(a) under the Investment Company
Act [17 CFR 270.17g-1].
---------------------------------------------------------------------------

    In order to better understand instances when funds receive
financial support from an affiliated entity, our proposal would also
require new information regarding the provision of such financial
support.\419\ We recently adopted disclosure requirements relating to
fund sponsors' support of money market funds as part of our money
market reform amendments in 2014, including a new requirement that
money market funds file reports on Form N-CR disclosing, among other
things, the receipt of financial support.\420\ As with money market
funds, we believe that it is important that the Commission understand
the nature and extent that a fund's sponsor provides financial support
to a fund, and are therefore proposing to extend this requirement to
all funds that would file reports on Form N-CEN. Although we believe it
is an infrequent practice, based on staff experience, non-money market
funds have received sponsor support in the past and we believe this
item would allow Commission staff to readily identify any funds that
have received such support for further analysis and review, as
appropriate. For consistency, Form N-CEN would include a substantially
similar definition of ``financial support'' as provided by Form N-
CR.\421\ In addition, the definition in Form N-CEN would also
explicitly exclude certain routine transactions from the definition of
financial support, as is the case for money market funds.\422\ If the
fund received financial support, it would also be required to provide
more detailed information in the form of an attachment as required by
Part G of Form N-CEN.\423\
---------------------------------------------------------------------------

    \419\ Item 15 of proposed Form N-CEN.
    \420\ See Money Market Fund Reform 2014 Release, supra note 13.
    \421\ See Instruction to Item 15 of proposed Form N-CEN; see
also Part C of Form N-CR.
    \422\ See id.
    \423\ Item 79.a.ii of proposed Form N-CEN. This requirement
would not apply to money market funds, as money market funds
currently provide this information through reports on Form N-CR.
---------------------------------------------------------------------------

    In addition, Form N-CEN would include a new item requiring
reporting as to whether the fund relied on orders from the Commission
granting the fund an exemption from one or more provisions of the
Investment Company Act, Securities Act or Securities Exchange Act
during the reporting period.\424\ Funds would identify any such order
by release number.\425\ We are proposing to collect this information in
a structured format to better monitor fund reliance on exemptive
orders, which will assist us with our oversight functions.
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    \424\ Item 16 of proposed Form pN-CEN. Form N-SAR currently
requires funds to attach information required to be reported on Form
N-1Q pursuant to an existing exemptive order. See Instructions to
Specific Items 77P and 102O of Form N-SAR. Form N-CEN would require
the fund to file as an attachment any information required to be
filed pursuant to exemptive orders issued by the Commission and
relied on by the fund. Instruction to Item 79.a.vi of proposed Form
N-CEN.
    \425\ See Item 16.a.i of proposed Form N-CEN.
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    As with Form N-SAR,\426\ proposed Form N-CEN would require
identifying information for the fund's principal underwriters \427\ and
independent public accountants,\428\ including, as applicable, name,
SEC file number, CRD number, PCAOB number, LEI (if any), state or
foreign country, and whether a principal underwriter was hired or
terminated or if the independent public accountant changed since the
last filing.\429\ If the independent public accountant changed since
the last filing, the fund would have to provide a detailed narrative
attachment to Form N-CEN.\430\
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    \426\ Items 11, 13, 77.K, 91, 102.J, 114, 115 of Form N-SAR.
    \427\ Item 17 of proposed Form N-CEN.
    \428\ Item 18 of proposed Form N-CEN.
    \429\ Item 17 and Item 18 of proposed Form N-CEN.
    \430\ Item 79.a.iii of proposed Form N-CEN.
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    We are proposing to include for all funds several other accounting
and valuation related items that are currently required for management
companies by Form N-SAR, and that provide important information to the
Commission regarding possible accounting and valuation issues related
to a fund. These items include a question relating to material changes
in the method of valuation of the fund's assets.\431\ However, unlike
reports on Form N-SAR, proposed Form N-CEN would not require a separate
attachment detailing the circumstances surrounding a change in
valuation methods.\432\ Instead, to facilitate review of this
information in a structured format, our proposal would include specific
items in the form itself, including the date of change, explanation of
change, type of investment, statutory or regulatory basis for the
change, and the fund(s) involved.\433\ We would also carry over to
proposed Form N-CEN the requirement from Form N-SAR \434\ that the fund
identify whether there have been any changes in accounting principles
or practices, and, if any, to provide more detailed information in a
narrative attachment to the form.\435\
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    \431\ Item 21 of proposed Form N-CEN. Valuation methodologies
are approved by fund directors for use by funds to determine, in
good faith, the fair value of portfolio securities (and other
assets) for which market quotations are not readily available. For
example, valuation methodology changes may include, but are not
limited to, changing from use of bid price to mid price for fixed
income securities or changes in the trigger threshold for use of
fair value factors on international equity securities.
    \432\ See Item 77.J and Item 102.I of Form N-SAR. Also unlike
Form N-SAR, this requirement would apply to UITs as well as
management investment companies. We believe it is important for the
Commission to have information on accounting and valuation for all
registered investment companies in order to assist us in our
oversight and examination functions.
    \433\ Compare Item 77.J of Form N-SAR with Item 21 of proposed
Form N-CEN. An instruction to Item 21 of proposed Form N-CEN would
clarify that we do not expect responses to this item to include
changes to valuation techniques used for individual securities
(e.g., changing from market approach to income approach for a
private equity security). Form N-SAR does not elaborate on the type
of information it is seeking by asking for changes in the method of
valuation of the registrant's assets. We are proposing to include
this instruction to provide clarity for filers and because we
believe that responding to Item 21 of proposed Form N-CEN for
individual securities may be overly burdensome for filers.
    \434\ See Item 77.L and Item 102.K of Form N-SAR.
    \435\ Item 22 and Item 79.a.v of proposed Form N-CEN. Like the
information requested regarding changes in valuation methods, Form
N-SAR only requests information from management companies regarding
changes in accounting principles and practices. Unlike Form N-SAR,
Form N-CEN would require this information from UITs as well, for the
same reasons as discussed above with respect to changes in valuation
methods. See supra n.432
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    Form N-CEN would also require, like Form N-SAR, that management
companies, other than SBICs, file a copy of their independent public
accountant's report on internal control as an attachment to their
reports on the form.\436\ However, Form N-CEN would also include a new
question that asks whether the report on internal control found any
material weaknesses.\437\ Form N-CEN would also contain a new
requirement that the fund disclose if the certifying accountant issued
an opinion other than an unqualified opinion with respect to its audit
of the fund's

financial statements.\438\ These questions will elicit information on
potential accounting issues identified by a fund's accountant.
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    \436\ See Item 77.B of Form N-SAR; Item 79.a.iv of proposed Form
N-CEN. As noted above, management companies (other than SBICs) are
currently required to file a copy of the independent public
accountant's report on internal control with their reports on Form
N-SAR. We continue to believe that a copy of the management
company's report on internal control should be filed with the
Commission and thus are proposing to carry over the filing
requirement to Form N-CEN.
    \437\ Item 19 of proposed Form N-CEN.
    \438\ Item 20 of proposed Form N-CEN.
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    Unlike Form N-SAR, proposed Form N-CEN would also include an item
relating to whether, during the reporting period, an open-end fund made
any payments to shareholders or reprocessed shareholder accounts as a
result of an NAV error.\439\ Proposed Form N-CEN would also require
information from management companies regarding payments of dividends
or distributions that required a written statement pursuant to section
19(a) of the Investment Company Act and rule 19a-1 thereunder.\440\
These questions will assist the staff in monitoring valuation of fund
assets and the calculation of the fund's NAV, as well as compliance
with distribution requirements under section 19(a) and rule 19a-1.
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    \439\ Item 23 of proposed Form N-CEN.
    \440\ Item 24 of proposed Form N-CEN. Section 19(a) of the
Investment Company Act generally prohibits a fund from making a
distribution from any source other than the fund's net income,
unless that payment is accompanied by a written statement that
adequately discloses the source or sources of the payment. See 15
U.S.C. 80a-19(a). Rule 19a-1 under the Investment Company Act
specifies the information required to be disclosed in the written
statement. See 17 CFR 270.19a-1; see also 2013-11 IM Guidance
Update, supra note 289.
---------------------------------------------------------------------------

    We request comment on the proposed information items to be reported
in Part B:
     Should any additional information regarding the fund be
requested? Should any of the information that would be requested by
proposed Form N-CEN be excluded? Should any of the information
requested for all Registrants be limited to only certain Registrants?
     Should any other identifying number other than file number
and LEI be requested?
     Should another definition or term be used to capture
affiliations across related funds rather than ``family of investment
companies''? Should a broader term, such as ``fund complex'' as defined
by instruction 1(b) to Item 17 of Form N-1A, be used instead? If so,
why would a broader definition be better?
     Should Form N-CEN request any additional information
concerning the board of directors or individual directors? For example,
should Form N-CEN request information about the length of service of
directors?
     Should Form N-CEN request information regarding a fund's
CCO, as proposed? Should we, as proposed, make the CCO's phone number a
non-public data field on all Form N-CEN filings? Are there any privacy
concerns with the other information that would be requested? Would
these concerns still exist if the information is reported in a non-
public data field? Are there any other concerns with the information
that would be requested? Is there other information we should request
in lieu of information that presents such concerns?
     The current proposal eliminates Form N-SAR's attachment
regarding matters submitted to a vote of security holders. Should we
retain this requirement in Form N-CEN? Why or why not? Are there any
costs to eliminating Form N-SAR's attachment in Item 77C in favor of
yes/no type questions? Should the item regarding votes submitted to
security holders apply to UITs?
     We request comment on Item 12 of proposed Form N-CEN.
Should this item apply to UITs? Should ``legal proceedings'' be
defined? Should it include administrative, mediated, or arbitrated
matters? Are there any other litigation matters that should be deemed
inherently material besides those enumerated in the instructions to the
item? Is there any additional information that should be requested
regarding material legal proceeding matters?
     Should Form N-CEN request information about the fidelity
bond beyond what has been proposed (e.g., bond amount, the cost of the
bond, or the number of insured persons)? Should any additional
information regarding claims filed or that could have been filed under
the fidelity bond be requested? For example, should dates of claims
filed or that could have been filed be requested? Should the nature of
the claim be disclosed?
     Is the term ``errors and omissions insurance'' clear or
should the form include a definition? In addition to requesting
information on whether any errors and omissions insurance claim was
made as proposed, should dates of insurance claims and amounts of
claims be requested? Should Form N-CEN permit funds to exclude the
advancement of expenses under a policy from disclosure as a claim?
     The definition of ``financial support'' in proposed Form
N-CEN would include a non-exclusive list of examples of actions that
would (and would not) be deemed ``financial support.'' Money market
funds currently report this information in reports on Form N-CR. Should
the definition in proposed Form N-CEN be further expanded or limited
from our definition in Form N-CR, and if so, how and why? For example,
should we include a requirement to report information relating to
inter-fund lending? Should we require non-money market funds to report
receipt of financial support on a more timely basis? For example,
should we require non-money market funds to file reports on Form N-CR
or a similar form if they receive financial support?
     Should any additional information concerning exemptive or
other orders be requested?
     We also considered whether to require funds to disclose
reliance on no-action letters. If we were to require this information,
should we limit it to certain no-action letters and, if so, which ones?
     Should we request additional information regarding fund
accounting and valuation? If so, what information? Should the items
relating to changes in valuation methods and changes in accounting
principles and practices apply to UITs, as proposed?
     We request comment on Items 23 and 24 of proposed Form N-
CEN. Should we request information regarding NAV errors and/or dividend
and distribution payments that required a written statement pursuant to
section 19(a) and rule 19a-1? Why or why not? Is there additional
information we should request?
c. Part C--Items Relating to Management Investment Companies
i. Background and Classification of Funds
    Part C of Form N-CEN would be completed by management investment
companies other than SBICs. For management companies offering multiple
series, this information would be completed separately as to each
series.\441\ The proposed information requirements in this section are
intended to provide the Commission and its staff with background
information on the fund industry and to assist us in meeting our legal
and regulatory requirements, such as requirements under the Paperwork
Reduction Act. Additionally, certain demographic information would
allow the Commission to better identify particular types of management
companies for monitoring and analysis if, for example, an issue arose
with respect to a particular fund type.
---------------------------------------------------------------------------

    \441\ General Instruction A to proposed Form N-CEN.
---------------------------------------------------------------------------

    Similar to Form N-SAR, proposed Form N-CEN would include general
identifying information on management companies and any series thereof,
including the full name of the fund, the fund's series identification
number and LEI, and whether it is the fund's first

time filing the form.\442\ Unlike Form N-SAR, we are proposing to
request specific information on the classes of open-end management
companies, including information relating to the number of classes
authorized, added, and terminated during the relevant period.\443\ Form
N-CEN would also include a new requirement to specifically provide
identifying information for each share class outstanding, including the
name of the class, the class identification number, and ticker
symbol.\444\
---------------------------------------------------------------------------

    \442\ Item 25 of proposed Form N-CEN; see also supra n.43
(discussing comment letters received on the FSOC Notice supporting
the use of LEIs). The proposed requirements relating to the name of
the fund and if this is the first filing with respect to the fund
are currently required by Form N-SAR. See Items 3 and 7.C of Form N-
SAR.
    \443\ Item 26.a-Item 26.c of proposed Form N-CEN.
    \444\ Item 26.d of proposed Form N-CEN.
---------------------------------------------------------------------------

    Pursuant to proposed Form N-CEN, a management company also would be
required to identify if it is any of the following types of funds:
\445\ ETF or exchange-traded managed fund (``ETMF''); \446\ index fund;
\447\ fund seeking to achieve performance results that are a multiple
of a benchmark, the inverse of a benchmark, or a multiple of the
inverse of a benchmark; interval fund; \448\ fund of funds; \449\
master-feeder fund; \450\ money market fund; target date fund; \451\
and underlying fund to a variable annuity or variable life insurance
contract. ETFs and ETMFs, index funds and master-feeder funds would
also be required to provide the additional information discussed
below.\452\
---------------------------------------------------------------------------

    \445\ Item 27 of proposed Form N-CEN. As discussed herein, many
of the types of funds listed in Item 27 are defined in proposed Form
N-CEN. With the exception of ``index fund'' and ``money market
fund,'' these terms are not currently defined in Form N-SAR. See
General Instruction H and Item 69 of Form N-SAR.
    \446\ For purposes of reporting on proposed Form N-CEN, we
propose to define ``exchange-traded fund'' as an open-end management
investment company (or series or class thereof) or UIT, the shares
of which are listed and traded on a national securities exchange at
market prices, and that has formed and operates under an exemptive
order under the Investment Company Act granted by the Commission or
in reliance on an exemptive rule under the Act adopted by the
Commission. We also propose to defined ``exchange-traded managed
fund'' as an open-end management investment company (or series or
class thereof) or UIT, the shares of which are listed and traded on
a national securities exchange at NAV-based prices, and that has
formed and operates under an exemptive order under the Investment
Company Act granted by the Commission or in reliance on an exemptive
rule under the Act adopted by the Commission. General Instruction F
of proposed Form N-CEN. We believe these are appropriate definitions
as they are similar to the one used for determining the
applicability of ETF registration statement disclosure requirements
for open-end funds. See General Instruction A to Form N-1A.
Currently, all ETFs and exchange-traded managed funds rely on relief
from certain provisions of the Investment Company Act that is
granted by Commission order. See ETF Proposing Release, supra note
5; Eaton Vance Management, et al.; Notice of Application, Investment
Company Act Release No. 31333 (Nov. 6, 2014) [79 FR 67471 (Nov. 13,
2014)] (Notice); Eaton Vance Management, et al.; Order, Investment
Company Act Release No. 31361 (Dec. 2, 2014) (Order). The Commission
has, however, proposed to codify the exemptive relief previously
granted to ETFs by order. See ETF Proposing Release, supra note 5
(proposing rule 6c-11).
    \447\ For purposes of reporting on proposed Form N-CEN, we
propose to define ``index fund'' as an investment company, including
an ETF, which seeks to track the performance of a specified index.
See Instruction 2 of Item 27 of proposed Form N-CEN. We believe this
is an appropriate definition as it is substantively similar to the
definition of ``index fund'' in Form N-SAR, but also takes into
account the emergence of ETFs. See Instruction to Item 69 of Form N-
SAR. Additionally, the proposed definition is largely similar to the
definition of ``index fund'' in rule 2a19-3 under the Investment
Company Act. See 17 CFR 270.2a19-3 (referring to an index fund for
purposes of the rule as a fund that has ``an investment objective to
replicate the performance of one or more broad-based securities
indices. . . .'').
    \448\ For purposes of reporting on proposed Form N-CEN, we
propose to define ``interval fund'' as a closed-end management
company that makes periodic repurchases of its shares pursuant to
rule 23c-3 under the Investment Company Act. See Instruction 3 of
Item 27 of proposed Form N-CEN. We believe this is an appropriate
definition because the term ``interval fund'' is commonly used to
refer to funds that rely on rule 23c-3. See 17 CFR 270.23c-3.
    \449\ For purposes of reporting on proposed Form N-CEN, we
propose to define ``fund of funds'' as a fund that acquires
securities issued by another investment company in excess of the
amounts permitted under section 12(d)(1)(A) of the Investment
Company Act. See 15 U.S.C. 80a-12(d)(1)(A); Instruction 1 of Item 27
of proposed Form N-CEN. We believe this is an appropriate definition
because ``funds of funds'' is a term typically used to refer to
funds that invest in other funds beyond the limits of the Investment
Company Act. Additionally, the proposed definition of ``fund of
funds'' largely tracks FINRA's definition of ``fund of funds'' in
its rules. See FINRA Code of Conduct Rule 2830(b)(11) (defining
``fund of funds'').
    \450\ For purposes of reporting on proposed Form N-CEN, we
propose to define ``master-feeder fund'' as a two-tiered arrangement
in which one or more funds holds shares of a single fund in
accordance with section 12(d)(1)(E) of the Investment Company Act.
See Instruction 4 of Item 27 of proposed Form N-CEN. We believe this
is an appropriate definition as it is the same definition as used
for purposes of Form N-1A. See General Instruction A to Form N-1A.
    \451\ For purposes of reporting on proposed Form N-CEN, we
propose to define ``target date fund'' as an investment company that
has an investment objective or strategy of providing varying degrees
of long-term appreciation and capital preservation through a mix of
equity and fixed income exposures that changes over time based on an
investor's age, target retirement date, or life expectancy. See
Instruction 5 of Item 27 of proposed Form N-CEN. We believe this is
an appropriate definition as it is the same definition as proposed
by the Commission in our 2010 proposing release relating to target
date funds. See Investment Company Advertising Release, supra note
6.
    \452\ See Item 27.a; Item 27.b; and Item 27.f of proposed Form
N-CEN.
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    First, proposed Form N-CEN would require a management company to
further indicate if it is an ETF or an ETMF.\453\ Second, index funds
would be required to report certain standard industry calculations of
relative performance. In particular, index funds would be required to
report a measure of the difference between the index fund's total
return during the reporting period \454\ and the index's return both
before and after fees and expenses--commonly called the ``tracking
difference''-- \455\ and also a measure of the volatility of the day-
to-day tracking difference over the course of the reporting period--
commonly called the fund's ``tracking error.'' \456\
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    \453\ See Item 27.a.i and Item 27.a.ii.
    \454\ With respect to index funds that are ETFs, we would expect
a fund to use its NAV-based total return, rather than market-based
total return, in responding to Items 27.b.i. and ii.
    \455\ Item 27.b.i of proposed Form N-CEN. The tracking
difference is the return difference between the fund and the index
it is following, annualized. Johnson, Ben, et al., On the Right
Track: Measuring Tracking Efficiency in ETFs, Morningstar ETF
Research, at 29 (Feb. 2013), available at http://media.morningstar.com/uk/MEDIA/Research_Paper/Morningstar_Report_Measuring_Tracking_Efficiency_in_ETFs_February_2013.pdf (``Morningstar Paper''), at 29. Thus, tracking difference = (1
+ RNAV--RINDEX)1/N--1, where
RNAV is the total return for the fund over the reporting
period, RINDEX is the total return for the index for the
reporting period, and N is the length of the reporting period in
years. N will equal to 1 if the reporting period is the fiscal year.
Id.
    \456\ See Item 27.b.ii of proposed Form N-CEN. Tracking error is
commonly understood as the standard deviation of the daily
difference in return between the fund and the index it is following,
annualized. Morningstar Paper, supra note 455, at 29. Thus, tracking
error = std (RNAV - RINDEX) x [radic]n, where
RNAV is the daily return for the fund, RINDEX
is the daily return for the index, std() represents the
standard deviation function, and n is the number of trading days in
the fiscal year. Id.
---------------------------------------------------------------------------

    Specifically, the proposed tracking difference data item would
equal the annualized difference between the index fund's total return
during the reporting period and the index's return during the reporting
period, and the proposed tracking error data item would equal the
annualized standard deviation of the daily difference between the index
fund's total return and the index's return during the reporting
period.\457\ Reporting of these measures will help data users,
including the Commission, investors, and other potential users,
evaluate the degree to which particular index funds replicate the
performance of the target index.\458\ In addition, tracking difference
and tracking error before fees and expenses \459\ would allow data
users to better understand the effect of factors other than fees and
expenses on the degree to which the

index fund replicates the performance of the target index.\460\
---------------------------------------------------------------------------

    \457\ See Morningstar Paper, supra note 455, at 29.
    \458\ See Morningstar Paper, supra note 455, at 5. We believe
this information would help data users understand which funds are
best tracking their target indices and could highlight outlier
funds.
    \459\ See Item 27.b.i.1 and Item 27.b.ii.1 of proposed Form N-
CEN.
    \460\ See Morningstar Paper, supra note 455, at 9.
---------------------------------------------------------------------------

    Finally, master funds would be required to provide identifying
information with respect to each feeder fund, including information on
unregistered feeder funds (i.e., feeder funds not registered as
investment companies with the Commission), such as offshore feeder
funds.\461\ Similarly, a feeder fund would provide identifying
information of its master fund.\462\
---------------------------------------------------------------------------

    \461\ Item 27.f.i of proposed Form N-CEN.
    \462\ Item 27.f.ii of proposed Form N-CEN.
---------------------------------------------------------------------------

    Proposed Form N-CEN would also require the management company to
report if it seeks to operate as a non-diversified company, as defined
in section 5(b)(2) of the Investment Company Act.\463\ Form N-SAR,
however, asks if the management company was a diversified investment
company at any time during the period or at the end of the reporting
period.\464\ We are proposing to require reporting on the non-
diversified status of a management company, rather than the diversified
status, because it is less common for funds to be non-diversified.\465\
Additionally, the question in proposed Form N-CEN is forward looking
rather than backward looking as in Form N-SAR. This change is intended
to include as part of the universe of non-diversified funds those funds
that seek to operate as non-diversified companies even if they should
happen to meet the definition of a ``diversified company'' as of the
end of a particular reporting period.\466\ We believe this change will
allow our staff to more accurately pinpoint the universe of non-
diversified funds and, thus, better able the staff to assist us in our
analysis and inspection functions.
---------------------------------------------------------------------------

    \463\ Item 28 of proposed Form N-CEN.
    \464\ See Item 60 of Form N-SAR.
    \465\ Based on Form N-SAR data between July 2014-December 2014,
74% of funds were diversified during the reporting period.
    \466\ For example, if a fund generally operates as a non-
diversified fund, but as a result of market conditions or other
reasons, happens to meet the definition of ``diversified fund'' as
of the end of the reporting period, it would still be required to
indicate that it was a non-diversified fund for purposes of this
item.
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the fund's
background and classification:
     Should additional identifying information be requested
with regard to series or classes of management investment companies?
Should any of the information proposed to be included in proposed Form
N-CEN be excluded?
     We request comment on our list of types of fund. Are there
any types of funds that we should add to or remove from the list? If
so, which ones and why? Should we include additional categories based
on investment strategy, as proposed? If so, which categories? Are the
definitions in proposed Form N-CEN of the type of funds listed
appropriate? Should any different definitions be used for types of
funds? If so, what definitions and why? Are any terms that are not
defined sufficiently clear or should we provide definitions? If so,
what terms and what definitions?
     We request comment on the information to be required for
index funds. Should we require the difference between the fund's total
return during the reporting period and the index's return during the
reporting period? Is this a meaningful methodology? Is there a better
methodology for calculating tracking difference or tracking error?
     Should the form solicit information about the intent of a
management company to operate as a non-diversified fund or should it
request information about past operations during the reporting period?
ii. Investments in Certain Foreign Corporations
    We are also proposing to require a management company to identify
if it invests in a controlled foreign corporation for the purpose of
investing in certain types of instruments, such as commodities,
including the name and LEI of such corporation, if any.\467\ As
discussed supra Part II.A.2.b, some funds use CFCs for making certain
investments, particularly in commodities and commodity-linked
derivatives, often for tax purposes. Information regarding assets
invested in a controlled foreign corporation for the purpose of
investing in certain types of instruments would provide investors
greater insight into special purpose entities, such as CFCs, that may
have certain legal, tax, and country-specific risks associated with
them. Combined with the information that we are proposing to collect in
Form N-PORT, Commission staff would likewise benefit from this
information by better understanding the use of CFCs and other similar
entities, which could allow for more efficient collaboration with
foreign regulatory authorities to the extent the Commission may need
books and records or other information for specific funds or general
inquiries related to CFCs.
---------------------------------------------------------------------------

    \467\ Item 29 of proposed Form N-CEN. An instruction to Item 29
of proposed Form N-CEN would define ``controlled foreign
corporation'' as having the meaning provided in section 957 of the
Internal Revenue Code.
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the fund's
investments in certain foreign corporations:
     Should we request additional information on whether the
management company invested in a foreign corporation or subsidiary,
including CFCs? For example, should we request information on the types
of investing activities the CFCs engage in or certain balance sheet
items from the CFC?
iii. Securities Lending
    As discussed above, we are proposing that funds provide certain
securities lending information in reports on Form N-PORT to help inform
the Commission, investors and other market participants about the scale
of securities lending activity by funds and their collateral
reinvestments.\468\ Additionally, we are proposing to require that
funds include in their financial statements certain information
concerning their income and expenses associated with securities lending
activities in order to increase the transparency of this information to
investors and other potential users.\469\ We believe, however, that
some important information concerning securities lending activity by
funds should be reported in a structured format, but on a less frequent
basis than reports on proposed Form N-PORT. In this regard, we believe
an annual reporting requirement on Form N-CEN may yield sufficiently
timely data and may more appropriately balance the requirements'
benefits with their associated costs than would additional monthly
reporting requirements on Form N-PORT.
---------------------------------------------------------------------------

    \468\ See supra Parts II.A.2.d and II.A.2.g.v.
    \469\ See proposed rule 6-03(m) of Regulation S-X.; see also
supra Parts II.C.3 and II.C.5.
---------------------------------------------------------------------------

    Accordingly, we propose to require that each management company
report annually on new Form N-CEN, in addition to whether it is
authorized to engage in securities lending transactions and whether it
loaned securities during the reporting period,\470\ information about
the fees associated with securities lending activity and information
about the management company's relationship with certain securities-
lending-related service providers. First, we propose to require that
management companies that loaned any securities during the reporting
period disclose certain information that would illuminate the
commonality of borrower default. Specifically, we propose to require
that those management companies disclose annually whether any borrower
of securities had defaulted on its

obligations to the management company to return loaned securities or
return them on time in connection with a security on loan during that
period.\471\
---------------------------------------------------------------------------

    \470\ Item 30.a-Item 30.b of proposed Form N-CEN.
    \471\ Item 30.b.i of proposed Form N-CEN.
---------------------------------------------------------------------------

    Under proposed Form N-CEN, management companies would also be
required to disclose whether a securities lending agent or any other
entity indemnifies the fund against borrower default on loans
administered by the agent and certain identifying information about the
entity providing indemnification if not the securities lending
agent.\472\ Together, these reporting requirements would yield data
that would allow the Commission, investors, and other potential users
to assess the counterparty risks associated with borrower default in
the securities lending market and the extent to which those risks are
mitigated by--or concentrated in--third parties that provide
indemnification against default.\473\
---------------------------------------------------------------------------

    \472\ Item 30.c.iv and Item 30.c.v.1-Item 30.c.v.2 of proposed
Form N-CEN.
    \473\ As discussed above, commenters to the FSOC Notice
suggested that enhanced securities lending disclosures could be
beneficial to investors and counterparties. See supra note 71.
---------------------------------------------------------------------------

    Because management companies sometimes engage external service
providers as securities lending agents or cash collateral managers, we
believe that some of the risks associated with securities lending
activities by management companies could be impacted by these service
providers and the nature of their relationships with the management
companies and one another. Accordingly, we propose to require that
management companies report some basic identifying information about
each securities lending agent and cash collateral manager.\474\ In
addition, we propose to require that funds disclose whether each of
these service providers is a first- or second-tier affiliated person of
the management company,\475\ which data would highlight those funds
that might be expected to rely on Commission exemptive relief with
respect to those transactions.\476\ We also propose to require each
management company to disclose whether it has made each of several
specific types of payments, including a revenue sharing split, non-
revenue sharing split (other than an administrative fee),
administrative fee, cash collateral reinvestment fee, and
indemnification fee, to one or more securities lending agents or cash
collateral managers during the reporting period.\477\ These disclosures
will allow the Commission, investors and other management company
boards of directors to understand better the type of fees a management
company pays in connection with securities lending activities and
whether, for example, the revenue sharing split that the company pays
to a securities lending agent includes compensation for other services
such as administration or cash collateral management.\478\ Finally, our
proposed disclosure of whether the cash collateral manager is a first-
or second-tier affiliate of the securities lending agent \479\ could
alert the Commission, investors, and other market participants to
potential conflicts of interest when an entity managing a cash
collateral reinvestment portfolio is affiliated with a securities
lending agent that is compensated with a share of revenue generated by
the cash collateral reinvestment pool. Together, the data that these
proposed requirements would yield would allow the Commission to monitor
the interaction of these service providers with management companies.
In addition to informing the Commission's risk analysis and,
potentially, future policymaking concerning securities lending activity
by management companies, we believe that this information could also
help inform other data users about the use of, and possible risks
associated with, the lending of portfolio securities by management
companies.
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    \474\ Item 30.c.i-Item 30.c.ii and Item 30.d.i-Item 30.d.ii of
proposed Form N-CEN.
    \475\ Item 30.c.iii and Item 30.d.iv of proposed Form N-CEN.
    \476\ Section 17(d) of the Investment Company Act makes it
unlawful for first- and second- tier affiliates, among others,
acting as principal, to effect any transaction in which the fund, or
a company it controls, is a joint or a joint and several participant
in contravention of Commission rules. 15 U.S.C. 80a-17(d). Rule 17d-
1(a) prohibits first- and second-tier affiliates of a registered
fund, among others, acting as principal from participating in or
effecting any transaction in connection with any joint enterprise or
other joint arrangement or profit-sharing plan in which the fund (or
any company it controls) is a participant unless an application or
arrangement or plan has been filed with the Commission and has been
granted. 17 CFR 270.17d-1. These provisions would prohibit a fund
from compensating a securities lending agent that is a first- or
second-tier affiliate with a share of loan revenue or lending to a
borrower that is a first- or second-tier affiliate without an
exemptive order, and generally from investing cash collateral in a
first- or second-tier affiliated liquidity pool unless the fund
satisfies the conditions in rule 12d1-1 under the Investment Company
Act, which provides exemptive relief for fund investments in an
affiliated registered money market fund and pooled investment
vehicle that would be an investment company but for sections 3(c)(1)
and 3(c)(7) of the Investment Company Act and that operate in
compliance with money market fund regulations subject to certain
conditions. A management company that has a service agreement with
an affiliated securities lending agent, under which compensation is
not based on a share of loan revenue generated by the lending
agent's efforts, generally is not a joint enterprise or other joint
arrangement or profit-sharing plan and, thus, does not need an
exemptive order. See Norwest Bank Minnesota, N.A., SEC Staff No-
action Letter (pub. avail. May 25, 1995) available at http://www.sec.gov/divisions/investment/noaction/1995/norwest052595.pdf.
    \477\ Item 30.e of proposed Form N-CEN. Management companies
that report that other payments were made to one or more securities
lending agents or cash collateral managers during the reporting
period would also be required to describe the type or types of other
payments. Item 30.e.vi of proposed Form N-CEN.
    \478\ In evaluating the fees and services of any securities
lending agent, the board of directors of a management company that
engages in securities lending may be assisted by reviewing and
comparing information on securities lending agent fee arrangements
of other management companies. See, e.g., SIFE Trust Fund, SEC No-
action Letter (publ. avail. Feb. 17, 1982) (management company's
board of directors determines that the securities lending agent's
fee is reasonable and based solely on the services rendered);
Neuberger Berman Equity Funds, et al., Investment Company Act
Release No. 25880 (Jan. 2, 2003) (notice), Investment Company Act
Release No. 25916 (Jan. 28, 2003) (order) (management company's
board of directors, including a majority of independent directors,
will determine initially and review annually, among other things,
that (i) the services to be performed by the affiliated securities
lending agent are appropriate for the lending fund, (ii) the nature
and quality of the services to be provided by the agent are at least
equal to those provided by others offering the same or similar
services; and (iii) the fees for the agent's services are fair and
reasonable in light of the usual and customary charges imposed by
others for services of the same nature and quality).
    \479\ Item 30.d.iii of proposed Form N-CEN.
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    We request comment on the Part C questions relating to the
management company's securities lending activities:
     Should management companies be required to report any or
all of the proposed information concerning securities lending activity?
If not, which items should not be required, and why? Should we collect
any additional information?
     Should we require, as proposed, that management companies
disclose annually whether any borrower of securities defaulted on its
obligations to the management company? Why or why not? Should we
instead, or additionally, require management companies to report
monthly on Form N-PORT whether any borrower of securities defaulted on
its obligations to the management company?
     Should we require, as proposed, that management companies
report certain information about each securities lending agent and each
cash collateral manager? Why or why not? Should we require that these
funds disclose whether each of these external service providers is a
first- or second-tier affiliate of the fund?
     In addition to requiring management companies to report
whether they made each of the proposed types of payments associated
with securities lending, should the Commission also require disclosure
of

specific rates and/or amounts paid during the reporting period of each
enumerated type of compensation, similar to the disclosures we are
proposing to require in the financial statements concerning the terms
governing the compensation of the securities lending agent and
collateral manager? Would that additional information be useful in
proposed Form N-CEN in a structured format for risk monitoring and use
by investors or other market participants, including other management
company boards of directors that are evaluating securities lending
agent services?
     Would the proposed reporting requirements regarding
securities lending yield beneficial information? If not, what
information should the Commission collect instead to conduct
appropriate risk monitoring of securities lending activity by
management companies? How should this information be collected?
     Would the proposed reporting requirements concerning
securities lending activity be burdensome?
     Should proposed Form N-CEN include a specific definition
for ``securities lending agent''? Why or why not? If so, how should the
term be defined? Should the form include a specific definition for
``cash collateral manager''? Why or why not? If so, how should the term
be defined?
     Are there other reporting requirements that the Commission
should adopt for securities lending activity? If so, would these
additional reporting requirements assist with Commission risk
monitoring, inform the public, or both?
iv. Reliance on Certain Rules
    Like Form N-SAR, proposed Form N-CEN would include a requirement
that management companies report whether they relied on certain rules
under the Investment Company Act during the reporting period.\480\
However, proposed Form N-CEN would require this information with
respect to additional rules not currently covered by Form N-SAR.\481\
We are proposing to collect information on these additional rules to
better monitor reliance on exemptive rules and to assist us with our
accounting, auditing and oversight functions, including, for some
rules, compliance with the Paperwork Reduction Act. For example,
reporting of reliance on rules 15a-4 and 17a-8 under the Investment
Company Act will allow the staff to monitor significant events relating
to interim investment advisory agreements and affiliated mergers,
respectively.
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    \480\ Item 31 of proposed Form N-CEN.
    \481\ Compare id. (requiring management companies to identify if
they relied upon any of the following rules: rule 10f-3 (exemption
for the acquisition of securities during the existence of an
underwriting or selling syndicate), rule 12d1-1 (exemptions for
investments in money market funds), rule 15a-4 (temporary exemption
for certain investment advisers), rule 17a-6 (exemption for
transactions with portfolio affiliates), rule 17a-7 (exemption of
certain purchase or sale transactions between an investment company
and certain affiliated persons thereof), rule 17a-8 (mergers of
affiliated companies), rule 17e-1 (brokerage transactions on a
securities exchange), rule 22d-1 (exemption from section 22(d) to
permit sales of redeemable securities at prices which reflect sales
loads set pursuant to a schedule), rule 23c-1 (repurchase of
securities by closed-end companies), rule 32a-4 (independent audit
committees)) with Items 40, 77.N, 77.O, 102.M, 102.N of Form N-SAR
(requiring information regarding rules 2a-7 (money market funds),
10f-3 (see above for description) and 12b-1 (distribution of shares
by registered open-end management investment company).
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    In addition, we are proposing to amend rule 10f-3 to eliminate the
requirement that funds provide the Commission with reports on Form N-
SAR regarding any transactions effected pursuant to the rule.\482\ Rule
10f-3 currently requires funds to maintain and preserve certain
information--the same information also required to be filed pursuant to
Form N-SAR--in its records regarding rule 10f-3 transactions.\483\ Our
proposed amendments to rule 10f-3 would eliminate the requirement to
periodically report this information,\484\ but would not alter the
requirement to maintain and preserve it. The Commission believes it is
unnecessary for funds to continue to file this information because
Commission staff can request the information in connection with staff
inspections, examinations and other inquiries.\485\
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    \482\ See proposed amendments to rule 10f-3.
    \483\ See rule 10f-3(c)(12) under the Investment Company Act [17
CFR 270.10f-3(c)(12)].
    \484\ See rule 10f-3(c)(9).
    \485\ Similar exemptive rules take this approach and do not
require filings with the Commission. See rule 17a-7 under the
Investment Company Act [17 CFR 270.17a-7] and rule 17e-1 under the
Investment Company Act [17 CFR 270.17e-1]. We note that we
previously proposed deleting this filing requirement from rule 10f-3
in 1996. See Exemption for the Acquisition of Securities During the
Existence of an Underwriting Syndicate, Investment Company Act
Release No. 21838 (Mar. 21, 1996) [61 FR 13620 (Mar. 27, 1996)]. We
chose not to adopt it in light of the other amendments to the rule
at that time, including the increase in the percentage limit on the
principal amount of an offering that an affiliated fund could
purchase. See Exemption for the Acquisition of Securities During the
Existence of an Underwriting of Selling Syndicate, Investment
Company Act Release No. 22775 (July 31, 1997) [62 FR 42401 (Aug. 7,
1997].
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    We request comment on the Part C questions relating to the
management company's reliance on certain exemptive rules and orders:
     Should any additional information concerning exemptive or
other rules be requested?
     We request comment on our proposal to eliminate the
requirement under rule 10f-3 that funds provide the Commission with
periodic reports on Form N-SAR. Should we eliminate this requirement or
continue it under Form N-CEN? Why or why not? Are there any costs or
benefits associated with eliminating this requirement?
v. Expense Limitations
    As in Form N-SAR,\486\ Form N-CEN would require information
regarding expense limitations.\487\ The requirements in Form N-CEN,
however, would be modified from Form N-SAR by requiring information on
whether the management company had an expense limitation arrangement in
place, whether any expenses of the fund were waived or reduced pursuant
to the arrangement, whether the waived fees are subject to recoupment,
and whether any expenses previously waived were recouped during the
period.\488\ We believe that more specific questions relating to
management company expense limitation arrangements would reduce burdens
and limit uncertainty for management companies when responding to these
items.
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    \486\ See Items 53.A-C of Form N-SAR (requiring the fund to
identify if expenses of the Registrant/Series were limited or
reduced during the reporting period by agreement, and, if so,
identify if the limitation was based upon assets or income).
    \487\ Item 32 of proposed Form N-CEN.
    \488\ Id. Proposed Form N-CEN would also include an instruction
that filers should provide information in response to the item
concerning any direct or indirect limitations, waivers or
reductions, on the level of expenses incurred by the fund during the
reporting period. The instructions would also provide an example of
how an expense limit may be applied--when an adviser agrees to
accept a reduced fee pursuant to a voluntary fee waiver or for a
temporary period such as for a new fund in its start-up phase. See
Instruction to Item 32 of proposed Form N-CEN.
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the
management company's expense limitations and fee waivers:
     Are the proposed Form N-CEN items relating to expense
limitations appropriate? Is there any additional information that we
should request on the management company's expense limitations? If so,
what items and why?
vi. Service Providers
    Similar to Form N-SAR,\489\ Form N-CEN would collect identifying
information on the management company's service providers, including
its advisers and sub-advisers,\490\ transfer agents,\491\ custodians
(including sub-

custodians),\492\ shareholder servicing agents,\493\ third-party
administrators,\494\ and affiliated broker-dealers.\495\ We are also
proposing new requirements that the management company provide
information on whether the service provider was hired or terminated
during the reporting period and whether it is affiliated with the fund
or its adviser(s).\496\ In addition, like Form N-SAR, Form N-CEN would
ask custodians to indicate the type of custody, but would expand upon
the types of custody listed.\497\ Together, these items would assist
the Commission in analyzing the use of third-party service providers by
management companies, as well as identify service providers that
service large portions of the fund industry.
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    \489\ See Items 8 and 10-15 of Form N-SAR.
    \490\ Item 33 of proposed Form N-CEN.
    \491\ Item 34 of proposed Form N-CEN. Form N-SAR equates a
``shareholder servicing agent'' with a ``transfer agent.'' See
Instruction to Item 12 of Form N-SAR.
    \492\ Item 37 of proposed Form N-CEN.
    \493\ Item 38 of proposed Form N-CEN.
    \494\ Item 39 of proposed Form N-CEN.
    \495\ Item 40 of proposed Form N-CEN.
    \496\ See, e.g., Items 33.a.vii, b and c.vii; 34.a.vi and b of
proposed Form N-CEN.
    \497\ Compare Items 15.E and 18 of Form N-SAR with Item
37.a.vii.6-Item 37.a.vii.7 of proposed Form N-CEN.
---------------------------------------------------------------------------

    Based on staff experience, management companies and their boards
often rely on pricing agents to help price securities held by the fund.
Therefore, we are proposing a new requirement that management companies
provide identifying information on persons that provided pricing
services during the reporting period,\498\ as well as persons that
formerly provided pricing services to the management company during the
current and immediately prior reporting period that no longer provide
services to that company.\499\ This would assist the Commission in
assessing the use of pricing services by the fund industry and the role
they play in valuing fund investments.
---------------------------------------------------------------------------

    \498\ Item 35 of proposed Form N-CEN.
    \499\ Item 36 of proposed Form N-CEN.
---------------------------------------------------------------------------

    Part C would also require identifying information on the ten
entities that, during the reporting period, received the largest dollar
amount of brokerage commissions from the management company \500\ and
with which the management company did the largest dollar amount of
principal transactions.\501\ Form N-SAR also requests identifying
information on these entities \502\--information that is not available
elsewhere in a structured format. Moreover, we continue to believe that
brokerage commission and principal transaction information provides
valuable information to Commission staff about management company
brokerage practices, and would assist the staff in identifying the
types of broker-dealers who service management company clients,
monitoring for changes in business practices, and assessing the types
of trading activities in which funds are engaged. Finally, similar to
Form N-SAR, we are proposing to ask whether the management company paid
commissions to broker-dealers for ``brokerage and research services''
within the meaning of section 28(e) of the Exchange Act.\503\
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    \500\ Item 41 of proposed Form N-CEN.
    \501\ Item 42 of proposed Form N-CEN.
    \502\ Items 20-23 of Form N-SAR. Form N-SAR includes an
instruction designed to help filers distinguish between agency and
principal transactions for purposes of reporting information
regarding brokerage commissions and principal transactions. See
Instruction to Items 20-23 of Form N-SAR. A substantially similar
instruction would be included in Form N-CEN. See Instructions to
Item 41-Item 42 of proposed Form N-CEN.
    \503\ Item 43 of proposed Form N-CEN; see also Item 26.B of Form
N-SAR (requiring disclosure if the fund's receipt of investment
research and statistical information from a broker or dealer was a
consideration which affected the participation of brokers or dealers
or other entities in commissions or other compensation paid on
portfolio transactions of Registrant). Section 28(e) of the Exchange
Act establishes a safe harbor that allows money managers to use
client funds to purchase ``brokerage and research services'' for
their managed accounts under certain circumstances without breaching
their fiduciary duties to clients. See 15 U.S.C. 78bb(e); see also
Commission Guidance Regarding Client Commission Practices Under
Section 28(e) of the Securities Exchange Act of 1934, Release No.
33-54165 (July 18, 2006) [71 FR 41978 (July 24, 2006)]. We continue
to believe that an item indicating whether a fund uses soft dollars
will assist our staff in their examinations and provide census data
as to the number and type of funds that rely on the safe harbor
provided by section 28(e).
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the fund's
service providers:
     Are the proposed Form N-CEN items relating to service
providers appropriate? Should any of the service providers or
information regarding the service providers included in proposed Form
N-CEN be excluded from the form? Are there other service providers for
which we should require information? For example, should we request
information on index providers and, in particular, affiliated index
providers?
     Are the service providers identified in proposed Form N-
CEN sufficiently clear or should we provide definitions for each
provider? If so, what definitions should we use and why?
     Should additional information be requested regarding
advisers or sub-advisers? Should the form provide a definition of the
term sub-adviser?
     Should any additional specific service provider
information be requested? Is there any proposed service provider
information that should not be requested? Should proposed Form N-CEN
request information on whether the service provider was hired or
terminated, or on the affiliation of the service provider, as proposed?
     In addition to requesting service provider city and state
or foreign country information as proposed, should street address,
phone or email information be requested? Would inclusion of this
additional information in proposed Form N-CEN raise any privacy or
other concerns?
     Should the form request information regarding sub-transfer
agents or other shareholder servicers?
     Should any additional information on service provider fees
be requested? For example, should custodian, audit, or administrator
fees be requested? Is certain service provider fee information
unnecessary as redundant with financial statements?
     Is the use of the term ``pricing service'' appropriate as
proposed? Should the form provide a definition of ``pricing service''?
     Should we, as proposed, include custody pursuant to rules
17f-6 and 17f-7 under the Investment Company Act (types of custody not
currently listed in Form N-SAR) on the list of types of custody in
proposed Form N-CEN?
     Is there additional information regarding broker-dealers
that should be requested? Should we use a different methodology other
than largest amount of brokerage commissions or collect information for
a larger or smaller number of brokers?
     Is there additional information regarding payments by the
management companies to brokers or dealers for ``brokerage and research
services'' that should be requested?
    We request comment on Part C, generally:
     Are there any additional questions regarding management
companies that we should include in proposed Form N-CEN?
d. Part D--Closed-End Management Companies and Small Business
Investment Companies
    Proposed Form N-CEN would, as Form N-SAR does, recognize that
closed-end funds and SBICs have particular characteristics that warrant
questions targeted specifically to them.\504\ Like Form N-SAR, Form N-
CEN would require additional

information to be reported by closed-end funds in Part D of the form
and would also treat SBICs differently than other management investment
companies, requiring them to complete Part D of the form in lieu of
Part C.\505\ The information requested in Part D would provide us with
information that is particular to closed-end funds and SBICs and, thus,
would assist us in monitoring the activities of these funds and our
examiners in their preparation for exams of these funds.
---------------------------------------------------------------------------

    \504\ See Items 86-88 of Form N-SAR (relating specifically to
closed-end funds) and Items 89-110 of Form N-SAR (relating
specifically to SBICs).
    \505\ As discussed above, SBICs are unique investment companies
that operate differently than other management investment companies.
See supra note 35.
---------------------------------------------------------------------------

    Similar to Form N-SAR, we are proposing to require in Part D of
proposed Form N-CEN information on the securities that have been issued
by the closed-end fund or SBIC, including the type of security issued
(common stock, preferred stock, warrants, convertible securities,
bonds, or any security considered ``other''), title of each class,
exchange where listed, and ticker symbol.\506\ We are also proposing to
require new information relating to rights offerings \507\ and
secondary offerings by the closed-end fund or SBIC,\508\ including
whether there was such an offering during the reporting period and if
so, the type of security involved.\509\ Together, this information will
allow the staff to quickly identify and track the securities and
offerings of closed-end funds and SBICs when monitoring and examining
these funds.
---------------------------------------------------------------------------

    \506\ Item 44 of proposed Form N-CEN; cf. Items 87-88 and 96 of
Form N-SAR (requesting information on the title and ticker of each
class of securities issued on an exchange and information regarding
certain specific types of securities). An instruction to Item 44 of
proposed Form N-CEN would indicate that the fund should provide the
ticker symbol for any security not listed on an exchange, but that
has a ticker symbol.
    \507\ Item 45 of proposed Form N-CEN.
    \508\ Item 46 of proposed Form N-CEN.
    \509\ See Item 45 and Item 46 of proposed Form N-CEN. Item 45.c
of proposed Form N-CEN would also ask for the percentage of
participation in a primary rights offering and an accompanying
instruction to this item would address the method of calculating
such percentage.
---------------------------------------------------------------------------

    Like Form N-SAR,\510\ we are also proposing to require that each
closed-end fund or SBIC report information on repurchases of its
securities during the reporting period.\511\ However, unlike Form N-
SAR, which requires information on the number of shares or principal
amount of debt and net consideration received or paid for sales and
repurchases for common stock, preferred stock, and debt securities,
Form N-CEN would only require the closed-end fund or SBIC to indicate
if it repurchased any outstanding securities issued by the closed-end
fund or SBIC during the reporting period and indicate which type of
security.\512\
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    \510\ See Items 86 and 95 of Form N-SAR.
    \511\ Item 47 of proposed Form N-CEN.
    \512\ We note that, with respect to closed-end funds, financial
information relating to monthly sales and repurchases of shares
would be reported monthly on proposed Form N-PORT. See Item B.6 of
proposed Form N-PORT (requiring the aggregate dollar amounts for
sales and redemptions/repurchases of fund shares during each of the
last three months).
---------------------------------------------------------------------------

    We are also proposing to carry over Form N-SAR's requirements \513\
relating to default on long-term debt \514\ and dividends in
arrears.\515\ However, unlike Form N-SAR, which requires an attachment
stating detailed information on defaults and arrears on senior
securities,\516\ we are proposing that Form N-CEN only require a yes/no
question and text-based responses directly in the form.\517\ We are
similarly proposing to carry over the Form N-SAR requirement \518\
regarding modifications to the constituent's instruments defining the
rights of holders.\519\ Similar to Form N-SAR, if a closed-end fund or
SBIC made modifications to such an instrument, it would also be
required to file an attachment in Part G of Form N-CEN with a more
detailed description of the modification.\520\ This item provides the
Commission with information on and copies of documents reflecting
changes to shareholders' rights.
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    \513\ See Items 77.G and 102.F of Form N-SAR.
    \514\ Item 48 of proposed Form N-CEN.
    \515\ Item 49 of proposed Form N-CEN.
    \516\ Items 77.G and 102.F of Form N-SAR.
    \517\ Item 48 of proposed Form N-CEN would require, with respect
to any default on long-term debt, the nature of the default, the
date of the default, the amount of the default per $1000 face
amount, and the total amount of default. An instruction to this item
would define ``long-term debt'' to mean a debt with a period of time
from date of initial issuance to maturity of one year or greater.
Item 49 of proposed Form N-CEN would require, with respect to any
dividends in arrears, the title of the issue and the amount per
share in arrears. This item would define ``dividends in arrears'' to
mean dividends that have not been declared by the board of directors
or other governing body of the fund at the end of each relevant
dividend period set forth in the constituent instruments
establishing the rights of the stockholders.
    \518\ Items 77.I and 102.H of Form N-SAR.
    \519\ Item 50 of proposed Form N-CEN.
    \520\ Item 79.b.ii of proposed Form N-CEN.
---------------------------------------------------------------------------

    Part G of proposed Form N-CEN would also require closed-end funds
or SBICs to file attachments regarding material amendments to
organizational documents,\521\ new or amended investment advisory
contracts,\522\ information called for by Item 405 of Regulation S-
K,\523\ and, for SBICs only, senior officer codes of ethics.\524\ Where
possible, we sought to eliminate the need to file attachments with the
census reporting form in order to simplify the filing process and
maximize the amount of information we receive in a data tagged format.
However, the attachments proposed to be required with reports on Form
N-CEN, provide us with information that is not otherwise updated or
filed with the Commission and, thus, we believe they should continue to
be filed in attachment form. All of the attachments in proposed Form N-
CEN that are specific to closed-end funds and SBICs are also currently
required by Form N-SAR.\525\
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    \521\ Item 79.b.i of proposed Form N-CEN.
    \522\ Item 79.b.iii of proposed Form N-CEN.
    \523\ Item 79.b.iv of proposed Form N-CEN.
    \524\ Item 79.b.v of proposed Form N-CEN. This item applies only
to SBICs because other management investment companies, including
closed-end funds, provide this information in filings on Form N-CSR.
See Items 2 and 3 of Form N-CSR; see also rule 30d-1 under the
Investment Company Act [17 CFR 270.30d-1].
    \525\ Compare Item 79.b of proposed Form N-CEN with Items
77.Q.1, 77.Q.2, 102.P.1, 102.P.2, and 102.P.3 of Form N-SAR; see
also Instructions to Specific Items 77Q1(a), 77Q1(e), 77Q2,
102P1(a), 102P1(e), 102P2, and 102P3 of Form N-SAR.
---------------------------------------------------------------------------

    Similar to Form N-SAR, we are proposing to require other census-
type information relating to management fees and net operating
expenses. Closed-end funds would be required to report the fund's
advisory fee as of the end of the reporting period as a percentage of
net assets.\526\ Additionally, closed-end funds and SBICs would both be
required to report the fund's net annual operating expenses as of the
end of the reporting period (net of any waivers or reimbursements) as a
percentage of net assets.\527\ Unlike open-end funds, which provide
management fee and net expense information to the Commission in a
structured format,\528\ such information is not reported to or updated
with the Commission in a structured format by closed-end funds or
SBICs. This information would allow the Commission to track industry
trends relating to fees. Like Form N-SAR, proposed Form N-CEN also
would

require, for the end of the reporting period, the market price per
share \529\ and NAV per share \530\ of the fund's common stock.
---------------------------------------------------------------------------

    \526\ Item 51 of proposed Form N-CEN; cf. Items 47-52 and 72.F
of Form N-SAR (requesting advisory fee information for management
companies, including closed-end funds). Whereas Form N-SAR requests
information regarding the advisory fee rate and the dollar amount of
gross advisory fees, an instruction to Item 51 of proposed Form N-
CEN would explain that the management fee reported should be based
on the percentage of amounts incurred during the reporting period.
    \527\ Item 52 of proposed Form N-CEN; cf. Items 72.X and 97.X of
Form N-SAR (requesting total expenses in dollars for closed-end
funds and SBICs).
    \528\ Management fee information for open-end funds is currently
tagged in XBRL format in the fund's risk return summary and is
therefore not required by proposed Form N-CEN. See General
Instruction C.3.G of Form N-1A.
    \529\ Item 53 of proposed Form N-CEN; see Items 76 and 101 of
Form N-SAR.
    \530\ Item 54 of proposed Form N-CEN; see Items 74.V.1 and 99.V
of Form N-SAR.
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    Finally, like Form N-SAR, proposed Form N-CEN would require
information regarding an SBIC's investment advisers, transfer agents,
and custodians.\531\ This information is the same as what would be
reported by open-end and closed-end funds in Part C of proposed Form N-
CEN, but SBICs would not be required to fill out Part C of the proposed
form. As noted above, proposed Form N-CEN, like Form N-SAR, would
recognize that SBICs have particular characteristics that warrant
questions targeted specifically to them. The majority of questions in
Part C of proposed Form N-CEN would be inapplicable to SBICs or
otherwise request information that would not be helpful to us in
carrying out our regulatory functions with respect to SBICs.
Accordingly, we propose to except SBICs from filling out Part C of the
form and instead would include certain service provider questions from
Part C in Part D of the form as response items for SBICs.
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    \531\ Item 55-Item 57 of proposed Form N-CEN.
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    We request comment on the following information requirements
relating to closed-end funds and SBICs:
     Are the proposed Form N-CEN items relating to closed-end
funds and SBICs appropriate? Are there other information items relating
to closed-end funds and SBICs that we should require? If so, what
information and why? Are there any items relating to closed-end funds
and SBICs in proposed Form N-CEN that should be excluded from the form?
     Is there additional information regarding trading in
closed-end fund or SBIC securities that should be requested?
     Is there additional information regarding repurchases that
should be requested?
     Should the form provide specific instructions on the
calculation of management fees?
     Should net annual operating expenses be defined? Should
they include amortization and depreciation expenses?
     Should the management fee for closed-end funds be
requested as proposed or should other information such as the absolute
amount of fees be requested?
    Should we request this information for SBICs? Should the form
request information on what the fee is based upon, such as a percentage
of income or performance? Should breakpoints used in calculating the
management fee be reported at each breakpoint level or should an
average management fee be provided? Should the management fee
information requested be forward-looking or should it be backward
looking, as proposed, providing a management fee based on fees charged
during the reporting period and, if so, which NAV (e.g., year-end or
average) should be used?
     If a closed-end fund or SBIC pays a performance fee,
should the form provide instructions regarding how they should
calculate the fees to be disclosed?
     In connection with defaults, is reference to a $1,000 face
amount appropriate? Would this requirement appropriately provide
meaningful information not only on the amount of principal default but
default on interest payments? Should the form also require information
on the amount of debt outstanding to provide additional context and
information related to the default?
     Regarding dividends in arrears, should the form request
per share amounts as proposed or should it request the aggregate amount
in arrears?
e. Part E--Exchange-Traded Funds and Exchange-Traded Managed Funds
    We are proposing to include a section in Form N-CEN related
specifically to ETFs--Part E--which ETFs would complete in addition to
Parts A, B, and G, and either Part C (for open-end funds) or Part F
(for UITs). For purposes of Form N-CEN, an ETF is a special type of
investment company that is registered under the Investment Company Act
as either an open-end fund or a UIT. Unlike other open-end funds and
UITs, an ETF does not sell or redeem its shares except in large blocks
(or ``creation units'') and with broker-dealers that have contractual
arrangements with the ETF (called ``authorized participants'').\532\
However, national securities exchanges list ETF shares for trading,
which allows investors to purchase and sell individual shares
throughout the day in the secondary market. Thus, ETFs possess
characteristics of traditional open-end funds and UITs, which issue
redeemable shares, and of closed-end funds, which generally issue
shares that trade at negotiated prices on national securities exchanges
and that are not redeemable.\533\
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    \532\ For purposes of Form N-CEN, ``creation unit'' is defined
as ``a specified number of Exchange-Traded Fund or Exchange-Traded
Managed Fund shares that the fund will issue to (or redeem from) an
authorized participant in exchange for the deposit (or delivery) of
specified securities, cash, and other assets.'' Instruction 8 to
Item 60 of proposed Form N-CEN. For purposes of Form N-CEN,
``authorized participant'' is defined as ``a broker-dealer that is
also a member of a clearing agency registered with the Commission,
and which has a written agreement with the Exchange-Traded Fund or
Exchange-Traded Managed Fund or one of its designated service
providers that allows it to place orders to purchase or redeem
creation units of the Exchange-Traded Fund or Exchange-Traded
Managed Fund.'' Instruction to Item 59 of proposed Form N-CEN.
    \533\ See generally Actively Managed Exchange-Traded Funds,
Investment Company Act Release No. 25258 (Nov. 8, 2001) [66 FR 57614
(Nov. 15, 2001)]; ETF Proposing Release, supra note 446.
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    Currently, ETFs are subject to the same comprehensive information
reporting requirements on Form N-SAR as are other open-end funds or
UITs, and they are not required to report additional, more specialized
information because Form N-SAR predates the introduction of ETFs to the
market and has not been amended to address ETFs' distinct
characteristics. In 2009, the Commission amended its registration
statement disclosure requirements for ETFs \534\ that are open-end
funds to better meet the needs of investors who purchase those ETF
shares in secondary market transactions.\535\ We believe that it is
appropriate--and accordingly propose--to similarly tailor some of the
comprehensive information reporting requirements in proposed new Form
N-CEN to the special characteristics of ETFs. Funds and UITs meeting
the definition of ``exchange-traded fund'' in Form N-CEN would be
required to disclose information pursuant to the items in Part E of the
form, as would certain similar investment products known as ``exchange-
traded managed funds.'' \536\
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    \534\ See General Instruction A to Form N-1A (defining
``exchange-traded fund'').
    \535\ See Enhanced Disclosure and New Prospectus Delivery Option
for Registered Open-End Management Investment Companies, Securities
Act Release No. 8998 (Jan. 13, 2009) [74 FR 4546, 4558 (Jan. 26,
2009)].
    \536\ General Instruction A to proposed Form N-CEN; see also
supra note 446.
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    Some of the new reporting requirements for ETFs that we are
proposing today as part of Form N-CEN relate to an ETF's (or its
service provider's) interaction with authorized participants. These
entities have an important role to play in the orderly distribution and
trading of ETF shares and are significant to the ETF marketplace.\537\
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    \537\ See ETF Proposing Release, supra note 446, at 14620-21.
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    Because of the importance of authorized participants, we are
proposing new reporting requirements

concerning these entities. Currently, the information we have regarding
reliance by ETFs on particular authorized participants is limited, and
we believe that collecting information concerning these entities on an
annual basis would allow us to understand and better assess the size,
capacity, and concentration of the authorized participant framework and
also inform the public about certain characteristics of the ETF primary
markets. Accordingly, we propose to require each ETF to report
identifying information about its authorized participants \538\ and the
dollar value of the ETF shares the authorized participant purchased and
redeemed from the ETF during the reporting period.\539\ More
specifically, proposed Form N-CEN would require an ETF to report the
name of each of its authorized participants (even if the authorized
participant did not purchase or redeem any ETF shares during the
reporting period),\540\ certain other identifying information,\541\ the
dollar value of the ETF's shares that the authorized participant
purchased from the ETF during the reporting period,\542\ and the dollar
value of the ETF's shares that the authorized participant redeemed
during the reporting period.\543\ Collection of this additional
information may allow the Commission staff to monitor how ETF purchase
and redemption activity is distributed across authorized participants
and, for example, the extent to which a particular ETF--or ETFs as a
group--may be reliant on one or more particular authorized
participants.
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    \538\ Item 59.a-Item 59.d of proposed Form N-CEN.
    \539\ Item 59.e-Item 59.f of proposed Form N-CEN.
    \540\ Item 59.a of proposed Form N-CEN.
    \541\ Item 59.b-Item 59.d of proposed Form N-CEN.
    \542\ Item 59.e of proposed Form N-CEN.
    \543\ Item 59.f of proposed Form N-CEN.
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    Other proposed new reporting requirements relate to certain
characteristics of ETF creation units--the large blocks of shares that
authorized participants may purchase from or redeem to the ETF. In the
primary market, ETF shares, bundled in creation units, are sold or
redeemed either primarily ``in kind''--i.e., in the form of the ETF's
constituent portfolio securities--or primarily in cash. When
transacting in kind or in cash, the particular authorized participant
wishing to purchase (or redeem) shares typically bears, in the form of
a fixed fee, the transactional costs associated with assembling (or
disassembling) creation units. Those costs, therefore, are not
mutualized to non-transacting shareholders. When an authorized
participant purchases (or redeems) ETF shares all or partly in cash,
absent a countervailing effect, the ETF would experience additional
costs (e.g., brokerage, taxes) involved with buying the securities with
cash or selling portfolio securities to satisfy a cash redemption.
Therefore, in order to ensure that the purchasing or redeeming party
bears these costs rather than the non-transacting shareholders, the ETF
may charge a ``variable'' fee, so called because it is often computed
as a percentage of the value of the creation unit. We understand that
such variable fees also can take the form of a dollar amount.
    In order to better understand the capital markets implications of
different creation unit requirements, primary market transaction
methods, and transaction fees, we are proposing to require that ETFs
annually report summary information about these characteristics of
creation units and primary market transactions. ETFs are not currently
required to report the information discussed below in a structured
format, and public availability of many of the proposed data items is
limited and indeterminable. To better understand the commonality of
different transaction methods and the degree to which it varies across
ETFs and over time, we propose to require that ETFs report the total
value (i) of creation units that were purchased by authorized
participants primarily in exchange for portfolio securities on an in-
kind basis; \544\ (ii) of those that were redeemed primarily on an in-
kind basis; \545\ (iii) of those purchased by authorized participants
primarily in exchange for cash; \546\ and (iv) of those that were
redeemed primarily on a cash basis.\547\ For purposes of these proposed
reporting requirements concerning transaction methods and transaction
fees, ``primarily'' would mean greater than 50% of the value of the
creation unit.\548\ To better understand the effects of primary market
transaction fees on ETF pricing and trading and to better inform the
public about such fees, we also propose to require that ETFs report
applicable transactional fees--including each of ``fixed'' and
``variable'' fees--applicable to the last creation unit purchased and
the last creation unit redeemed during the reporting period of which
some or all of the creation unit was transacted on a cash basis, as
well as the same figures for the last creation unit purchased and the
last creation unit redeemed during the reporting period of which some
or all of the creation unit was transacted on an in-kind basis.\549\
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    \544\ Item 60.a of proposed Form N-CEN.
    \545\ Item 60.c of proposed Form N-CEN.
    \546\ Item 60.b of proposed Form N-CEN.
    \547\ Item 60.d of proposed Form N-CEN.
    \548\ Instruction 9 to Item 60 of proposed Form N-CEN.
    \549\ Item 60.e-Item 60.h of proposed Form N-CEN.
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    We also propose to require ETFs to report the number of ETF shares
required to form a creation unit as of the last business day of the
reporting period,\550\ which we believe would also allow the Commission
and other data users to better analyze any effects that ETFs' creation
unit size requirements may have on ETF pricing and trading. We are
proposing that this information be as of the last business day of the
reporting period because we understand that these fees sometimes vary
over the course of the reporting period, and the fee level information
is likely to be most current if provided as of the last business day of
the period. In addition to information about authorized participants
and creation units, we propose to require that ETFs, like closed-end
funds, disclose the exchange on which the ETF is listed so that
Commission staff may be better able to quickly gather information as to
which ETFs may be effected should an idiosyncratic risk or market event
arise in connection with a particular exchange.\551\
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    \550\ Item 60 of proposed Form N-CEN.
    \551\ Item 58 of proposed Form N-CEN.
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    Finally, with respect to ETFs that are UITs, we ask for information
regarding tracking difference and tracking error.\552\ This information
is requested of open-end index funds in Item 27(b) and, for the same
reasons discussed in Part II.E.4.c.i of this release, the proposed form
would request this information of ETFs that are UITs.
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    \552\ Item 61 of proposed Form N-CEN.
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    Taken together, we believe that, in addition to informing the
Commission's risk analysis and, potentially, future policymaking
concerning ETFs, the information these proposed requirements would
yield could also help inform the interested public about the operation
of, and possible risks associated with, these funds.
    We request comment on the proposed reporting requirements for ETFs
and ETMFs:
     Should ETFs be required to report the proposed additional
information in Part E of proposed Form N-CEN that other funds would not
be required to report?
     Should ETFs that are UITs and ETFs that are open-end funds
be subject to the same special reporting requirements, or should the
requirements be different from one

another? If so, how? Should ETFs and ETMFs be subject to the same
special reporting requirements, or should the requirements be different
from one another? If so, how and why?
     Should the proposed items concerning authorized
participants be required? Why or why not? Should we require additional
information about authorized participants? For example, should we
require funds to report the volume of shares purchased and redeemed in
each month of the reporting period by each authorized participant, in
order to better understand how primary market transactions are
distributed across authorized participants and over the course of the
reporting period? Should we require funds to report information on
purchases and redemptions by each authorized participant on days when
the most primary or secondary market activity is observed, which could
be used to better understand how primary market activity responds to
periods of unusual activity? Why or why not? If so, what specific
information should be required?
     Should the proposed items concerning creation unit
characteristics and primary market transactions be required? Why or why
not?
     Should the ETFs and ETMFs that are subject to the proposed
special reporting requirements be defined as proposed? If not, how
should the group be defined? Are there certain entities that are not
included in the proposed definitions that should be? Are there certain
entities that are included in the proposed definitions that should not
be?
     Would the proposed reporting requirements yield beneficial
information? If not, what information should the Commission collect
instead to conduct appropriate risk monitoring of ETFs? How should this
information be collected?
     Would any of the proposed reporting requirements conflict
with agreements between private parties, such as ETFs and authorized
participants, to keep information confidential? If so, should the
information nonetheless be required to be disclosed?
     How might the proposed reporting requirements concerning
ETF primary market transaction fees be used by others outside the
Commission, if at all? Are the proposed fee categories (viz., fixed
fees and variable fees) appropriate, or would alternative categories be
more suitable? If so, what should those categories be?
     How costly would the proposed reporting requirements for
ETFs be? In addition to reporting and recordkeeping costs, are there
competitive or other costs that should be considered in connection with
these proposed requirements?
     Are there other reporting requirements that the Commission
should adopt for ETFs? If so, would these additional reporting
requirements assist with Commission risk monitoring, inform the public,
or both?
f. Part F--Unit Investment Trusts
    Part F of Form N-CEN would require information specific to UITs.
Like Form N-SAR, proposed Form N-CEN would recognize that UITs have
particular characteristics that warrant questions targeted specifically
to them.\553\ The information requested in Part F would inform us
further about the scope and composition of the UIT industry and, thus,
would assist us in monitoring the activities of UITs and our examiners
in their preparation for exams of UITs. Accordingly, similar to Form N-
SAR,\554\ proposed Form N-CEN would require certain identifying
information relating to a UIT's service providers and entities involved
in the formation and governance of UITs, including its depositor,\555\
sponsor,\556\ trustee,\557\ and third party administrator.\558\
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    \553\ See Items 111-133 of Form N-SAR (relating specifically to
UITs).
    \554\ See Items 111 (depositor information), 112 (sponsor
information), 113 (trustee information), and 114 (principal
underwriter information) of Form N-SAR.
    \555\ Item 62 of proposed Form N-CEN.
    \556\ Item 65 of proposed Form N-CEN (only applies to UITs that
are not insurance company separate accounts).
    \557\ Item 66 of proposed Form N-CEN (only applies to UITs that
are not insurance company separate accounts).
    \558\ Item 63 of proposed Form N-CEN. Form N-SAR does not
request information about a UIT's third-party administrator.
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    Proposed Form N-CEN would also ask whether a UIT is a separate
account of an insurance company.\559\ Depending on a UIT's response to
this item, it would proceed to answer certain additional questions in
Part F.\560\ While Form N-SAR generally does not differentiate between
UITs that are and are not separate accounts of insurance companies,
proposed Form N-CEN would make this distinction. We believe that by
distinguishing between these different types of UITs, the form will
allow us to better target the information requests in the form
appropriate to the type of UIT. We also believe this new approach will
allow filers to better understand the information being requested of
them because it will be more reflective of their operations and should
thus improve the consistency of the information reported.
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    \559\ Item 64 of proposed Form N-CEN; see Item 117.A of Form N-
SAR.
    \560\ If a UIT answers ``yes'' to this item, it would proceed to
answer Items 73 through 78 of the form. However, if a UIT answers
``no'' to this item, it would proceed to Items 65 through 72, and
78. Id.
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    Accordingly, similar to Form N-SAR,\561\ a UIT that is not a
separate account of an insurance company would provide the number of
series existing at the end of the reporting period that had securities
registered under the Securities Act \562\ and, for new series, the
number of series for which registration statements under the Securities
Act became effective during the reporting period \563\ and the total
value of the portfolio securities on the date of deposit.\564\ Proposed
Form N-CEN would also carry over from Form N-SAR \565\ requirements
relating to the number of series with a current prospectus,\566\ the
number of existing series (and total value) for which additional units
were registered under the Securities Act,\567\ and the value of units
placed in portfolios of subsequent series.\568\ Our proposal would also
require that a UIT that is not a separate account of an insurance
company provide the total assets of all series combined as of the
reporting period,\569\ which is also currently required by Form N-
SAR.\570\
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    \561\ See Items 118-120 of Form N-SAR (all UITs are required to
complete these items).
    \562\ Item 67 of proposed Form N-CEN.
    \563\ Item 68.a of proposed Form N-CEN.
    \564\ Item 68.b of proposed Form N-CEN.
    \565\ See Items 121-124 of Form N-SAR (all UITs are required to
complete these items).
    \566\ Item 69 of proposed Form N-CEN.