board.\1221\ We estimate that fund complexes will have at least one
fund that will be subject to the highly liquid investment minimum
requirement. Thus, we estimate that 873 fund complexes will be subject
to this requirement under rule 22e-4 and that the total burden for
preparation of the board report associated will be 12,222 hours, at an
aggregate cost of $3,687,552.\1222\
---------------------------------------------------------------------------

    \1220\ Under the proposal, because each fund within a fund
complex would have been required to determine its own three-day
liquid asset minimum, the estimate under the proposal assumed that
the report at issue would incorporate an assessment of the three-day
liquid asset minimum for each fund within the fund complex. As
adopted, rule 22e-4 only requires the assessment of the highly
liquid investment minimum for funds that do not primarily hold
assets that are highly liquid investments.
    \1221\ The estimate is based on the following calculation: 4
hours x $306 (hourly rate for a senior portfolio manager) = $1,224;
4 hours x $288 (hourly rate for compliance manager) = $1,152; 4
hours x $433 (hourly rate for assistant general counsel) = $1,732;
and 2 hours x $58 (hourly rate for general clerk) = $116. $1,224 +
$1,152 + $1,732 + $116 = $4,224. The hourly wages used are from
SIFMA's Management & Professional Earnings in the Securities
Industry 2013, modified by Commission staff to account for an 1800-
hour work-year and inflation, and multiplied by 5.35 to account for
bonuses, firm size, employee benefits, and overhead. The hourly wage
used for the general clerk is from SIFMA's Office Salaries in the
Securities Industry 2013, modified by Commission staff to account
for an 1800-hour work-year and inflation, and multiplied by 5.35 to
account for bonuses, firm size, employee benefits, and overhead.
    \1222\ These estimates are based on the following calculations:
873 fund complexes x 14 hours =12,222 hours; and $4,224 x 873 fund
complexes = $3,687,552.
---------------------------------------------------------------------------

3. Recordkeeping
    Final rule 22e-4 requires a fund or In-Kind ETF to maintain a
written copy of the policies and procedures adopted pursuant to its
liquidity risk management program for five years in

an easily accessible place.\1223\ The rule also requires a fund to
maintain copies of materials provided to the board in connection with
its initial approval of the liquidity risk management program and any
written reports provided to the board, for at least five years, the
first two years in an easily accessible place.\1224\ If applicable, a
fund must also maintain a written record of how its highly liquid
investment minimum and any adjustments to the minimum were determined,
as well as any reports to the board regarding a shortfall in the fund's
highly liquid investment minimum, for five years, the first two years
in an easily accessible place.\1225\ The retention of these records
would be necessary to allow the staff during examinations of funds to
determine whether a fund is in compliance with the liquidity risk
management program requirements.
---------------------------------------------------------------------------

    \1223\ See rule 22e-4(b)(4)(i).
    \1224\ See rule 22e-4(b)(4)(ii).
    \1225\ See rule 22e-4(b)(4)(iii).
---------------------------------------------------------------------------

    Under the proposal, the recordkeeping requirements were
substantially similar to those being adopted. In the Proposing Release,
we estimated that the burden to retain these records would be five
hours per fund complex, with 2.5 hours spent by a general clerk and 2.5
hours spent by a senior computer operator, with an estimated time cost
per fund complex of $361.\1226\ We also estimated that the total burden
for recordkeeping related to the liquidity risk management program
would be 4,335 hours, at an aggregate cost of $312,987.\1227\
---------------------------------------------------------------------------

    \1226\ This estimate was based on the following calculations:
2.5 hours x $57 (hourly rate for a general clerk) = $143; 2.5 hours
x $87 (hour rate for a senior computer operator) = $218. $143 + $218
= $361.
    \1227\ This estimate was based on the following calculations:
867 fund complexes x 5 hours = 4,335 hours. 867 fund complexes x
$361 = $312,987.
---------------------------------------------------------------------------

    We did not receive any comments on the estimated hour and cost
burdens associated with the recordkeeping requirements of rule 22e-4.
The Commission has modified the estimated increase in annual burden
hours and total time costs that will result from these requirements in
light of modifications to change those subject to the requirements to
funds and In-Kind ETFs and to require them to maintain reports to
boards concerning a shortfall of the fund's highly liquid investment
minimum and the new requirement to retain records submitted to the
board related to shortfalls of the minimum. We believe that, on an
annual basis, the burden to retain records in connection with rule 22e-
4 will be four hours, rather than five hours per fund complex, with 2
hours, rather than 2.5 hours, spent by a general clerk, and 2 hours,
rather than 2.5 hours, spent by a senior computer operator, with an
estimated time cost per fund complex of $292, rather than $361, based
on updated data concerning funds and fund personnel salaries.\1228\ In
addition, we estimate that the total burden for recordkeeping related
to the liquidity risk management program requirement of rule 22e-4 will
be 3,492 hours, rather than 4,335 hours, at an aggregate cost of
$254,916, rather than $312,987.\1229\
---------------------------------------------------------------------------

    \1228\ This estimate is based on the following calculations: 2
hours x $58 (hourly rate for a general clerk) = $116; 2 hours x $88
(hour rate for a senior computer operator) = $176. $116 + $176 =
$292.
    \1229\ This estimate is based on the following calculations: 873
fund complexes x 4 hours = 3,492 hours. 873 fund complexes x $292 =
$254,916.
---------------------------------------------------------------------------

4. Estimated Total Burden for Open-End Funds
    Amortized over a three-year period, we estimate that the hour
burdens and time costs associated with rule 22e-4 for open-end funds,
including the burden associated with (1) funds' initial documentation
and review of the required written liquidity risk management program,
(2) reporting to a fund's board regarding the fund's highly liquid
investment minimum, and (3) recordkeeping requirements will result in
an average aggregate annual burden of 26,190 hours, rather than 28,611
hours as proposed, and average aggregate time costs of $14,780,326.5,
rather than $14,431,215 as proposed.\1230\ We continue to estimate that
there are no external costs associated with this collection of
information.
---------------------------------------------------------------------------

    \1230\ These estimates are based on the following calculations:
43,650 hours (year 1) + (2 x 12,222 hours) (years 2 and 3) + (3 x
3,492 hours) (years 1, 2 and 3) / 3 = 26,190 hours; $36,201,127.5
(year 1) + (2 x $3,687,552) (years 2 and 3) + (3 x $254,916) (years
1, 2 and 3) / 3 = $14,780,326.5.
---------------------------------------------------------------------------

5. UIT Liquidity Determination
    As discussed above, we recognize that UITs may in some
circumstances be subject to liquidity risk (particularly where the UIT
is not a pass-through vehicle and the sponsor does not maintain an
active secondary market for UIT shares). We believe that UITs may not
have written policies and procedures regarding liquidity management and
are adopting a new requirement under rule 22e-4 with respect to UITs.
On or before the date of initial deposit of portfolio securities into a
registered UIT, the UIT's principal underwriter or depositor is
required to determine that the portion of the illiquid investments that
the UIT holds or will hold at the date of deposit that are assets is
consistent with the redeemable nature of the securities it issues, and
maintain a record of that determination for the life of the UIT and for
five years thereafter. The retention of these records would be
necessary to allow the staff during examinations to determine whether a
UIT is in compliance with the liquidity risk assessment required under
rule 22e-4. This assessment would occur on or before the initial
deposit of portfolio securities of a new UIT and thus would only need
to occur once. Maintenance of the records would be required for the
life of the UIT and for five years thereafter.
    We estimate that 1615 newly registered UITs will be subject to the
UIT liquidity determination requirement under rule 22e-4 each
year.\1231\ Compliance with rule 22e-4(c) will be mandatory for all
principal underwriters or depositors of such UITs. We estimate that the
principal underwriter or depositor of a UIT will incur a one-time
average burden of 10 hours to document its determination that the
portion of the illiquid investments that the UIT holds or will hold at
the date of deposit that are assets is consistent with the redeemable
nature of the securities it issues. Amortized over a 3 year period, we
estimate this would be an annual burden per UIT of about 3 hours.
Accordingly, we estimate that the total burden for the initial
documentation and review of funds' written liquidity risk management
program would be 16,150 hours.\1232\ We also estimate that it will cost
the principal underwriter or depositor of a UIT approximately $2,466 to
perform and document this review, for a total cost of approximately
$3,982,590.\1233\
---------------------------------------------------------------------------

    \1231\ This estimate is based upon staff review of new UIT
registration statements and semi-annual reporting on Form N-SAR
filed with the Commission and Monthly Unit Investment Trust Data
released by the Investment Company Institute, available at https://www.ici.org/research/stats, for the months of January through
December of 2015.
    \1232\ This estimate is based on the following calculation: 10
hours x 1615 new UITs = 16,150 hours.
    \1233\ These estimates are based on the following calculations:
5 hours x $308 (hourly rate for a senior programmer) = $1540; 2
hours x $463 (blended hourly rate for assistant general counsel
($433) and chief compliance officer ($493)) = $926. $1,540 + $926 =
$2,466; $2,466 x 1615 estimated new UITs = $3,982,590. The hourly
wages used are from SIFMA's Management & Professional Earnings in
the Securities Industry 2013, modified by Commission staff to
account for an 1800-hour work-year and inflation, and multiplied by
5.35 to account for bonuses, firm size, employee benefits, and
overhead.
---------------------------------------------------------------------------

    We estimate that the burden to retain these records will be two
hours per UIT, with 1 hour spent by a general clerk and 1 hour spent by
a senior computer operator, with an estimated time cost

per UIT of $146.\1234\ We also estimate that the total burden for
recordkeeping related to the liquidity risk management program will be
3,230 hours, at an aggregate cost of $235,790.\1235\ We estimate that
there are no external costs associated with this collection of
information.
---------------------------------------------------------------------------

    \1234\ This estimate is based on the following calculations: 1
hour x $58 (hourly rate for a general clerk) = $58; 1 hours x $88
(hour rate for a senior computer operator) = $88. $58 + 88 = $146.
    \1235\ This estimate is based on the following calculations:
1615 UITs x 2 hours = 3,230 hours. 1615 UITs x $146 = $235,790.
---------------------------------------------------------------------------

C. Form N-PORT

    Today, the Commission is adopting Form N-PORT, which will require
funds to report information within thirty days after the end of each
month about their monthly portfolio holdings to the Commission in a
structured data format.\1236\ Preparing a report on Form N-PORT is
mandatory and a collection of information under the PRA, and the
information required by Form N-PORT will be data-tagged in XML format.
Except for certain reporting items specified in the form, responses to
the reporting requirements will be kept confidential for reports filed
with respect to the first two months of each quarter; the third month
of the quarter will not be kept confidential, but made public sixty
days after the quarter end.
---------------------------------------------------------------------------

    \1236\ See Investment Company Reporting Modernization Adopting
Release, supra footnote 120.
---------------------------------------------------------------------------

    In the Investment Company Reporting Modernization Adopting Release,
we estimate that, for the 35% of funds that would file reports on Form
N-PORT in house, the per fund average aggregate annual hour burden will
be 144 hours per fund, and the average cost to license a third-party
software solution will be $4,805 per fund per year.\1237\ For the
remaining 65% of funds that would retain the services of a third party
to prepare and file reports on Form N-PORT on the fund's behalf, we
estimate that the average aggregate annual hour burden will be 125
hours per fund, and each fund will pay an average fee of $11,440 per
fund per year for the services of third-party service provider. In sum,
we estimate that filing reports on Form N-PORT will impose an average
total annual hour burden of 144 hours on applicable funds, and all
applicable funds will incur on average, in the aggregate, external
annual costs of $103,787,680, or $9,118 per fund.\1238\
---------------------------------------------------------------------------

    \1237\ See id. at n. 1426 and accompanying text.
    \1238\ See id. at n. 1499 and accompanying text.
---------------------------------------------------------------------------

    Today, we are also adopting amendments to Form N-PORT concerning
liquidity information that require a fund to report information about
the fund's highly liquid investment minimum (if applicable),\1239\ the
liquidity classification for each portfolio investment among four
liquidity categories (with the fourth category covering investments
that qualify as ``illiquid investments'' under the 15% illiquid
investment limit),\1240\ certain information on the percentage of the
fund's highly liquid investments that is segregated to cover, or
pledged to satisfy margin requirements in connection with, fund's
derivatives transactions in each of the other liquidity
categories,\1241\ and the aggregate percentage of the fund representing
each of the four liquidity categories.\1242\ Unlike the proposal, the
amendments adopted today will not require funds to indicate the dollar
amount attributable to different classifications for different portions
within a given holding.\1243\ We believe that requiring funds to report
information about the liquidity of portfolio investments will enhance
the Commission's ability to assess liquidity risk in the open-end fund
industry and assist in our regulatory oversight efforts. Moreover, we
believe that this information will help investors and other potential
users of information on Form N-PORT better understand the liquidity
risks in funds.
---------------------------------------------------------------------------

    \1239\ See Item B.7 of Form N-PORT.
    \1240\ See Item C.7.a of Form N-PORT.
    \1241\ See Item C.7.b of Form N-PORT. The fourth classification
category incorporates data that, under the proposal, would have been
reported as a 15% standard asset in response to proposed Item C.7 of
proposed Form N-PORT.
    \1242\ See Item C.7.c of Form N-PORT.
    \1243\ See supra section III.C
---------------------------------------------------------------------------

1. Liquidity Classification
    Under rule 22e-4(b)(1)(ii), an open-end management investment
company (other than a money market fund or an In-Kind ETF) is required
as part of its liquidity risk management program to classify the
liquidity of each of its portfolio investments (including each of the
fund's derivatives transactions) as a highly liquid investment,
moderately liquid investment, less liquid investment, or illiquid
investment.
    Under the proposal, all open-end funds would be required to
classify portfolio assets under a days-to-cash framework and report
such classifications on Form N-PORT.\1244\ In the Proposing Release, we
estimated that 8,734 funds would be required to file, on a monthly
basis, additional information on Form N-PORT as a result of the
proposed amendments to N-PORT to require funds provide additional
liquidity information.\1245\ We stated our expectation that funds would
incur a one-time internal burden to initially classify a fund's
portfolio securities and program existing systems to conduct the
ongoing classifications and reviews required under the proposal for
reporting purposes. We estimated that each fund would incur an average
one-time burden of 54 hours at a time cost of $15,330.\1246\ Amortized
over a three-year period, we estimated that this would result in an
average annual hour burden of approximately 18 burden hours and a time
cost of $5,110.\1247\
---------------------------------------------------------------------------

    \1244\ See id.; see also Proposing Release, supra footnote 9, at
section III.B.
    \1245\ See Proposing Release, supra footnote 9, at n.850 and
accompanying text. This was based on estimates that there were 8,734
open-end funds (excluding money market funds, and including ETFs
(for purposes of these calculations, we excluded non-1940 Act ETFs))
as of the end of 2014.
    \1246\ See Proposing Release, supra footnote 9, n.851 and
accompanying text. We estimated that these systems modifications
would include the following costs: (i) Project planning and systems
design (24 hours x $260 (hourly rate for a senior systems analyst) =
$6,240) and (ii) systems modification integration, testing,
installation and deployment (30 hours x $303 (hourly rate for a
senior programmer) = $9,090. $6,240 + $9,090 = $15,330.
    \1247\ $15,330 / 3 = $5,110. See Proposing Release, supra
footnote 9, at n.852 and accompanying text.
---------------------------------------------------------------------------

    Many commenters expressed concerns over the operational costs
associated with the assignment of liquidity classifications and the
reporting of this information on Form N-PORT. Several commenters
expressed the belief that the liquidity classification requirement
could impose significant direct costs to a fund and its shareholders
(e.g., new operational systems, trade order management systems, and
other processes to handle complex classification schemes), which
commenters anticipated to be in excess of the Commission's estimates
under the proposal.\1248\ One commenter estimated that the costs
associated with building a liquidity classification system could range
in the millions of dollars for fund complexes that have large numbers
of portfolio positions.\1249\ Another commenter estimated $2 million in
initial implementation costs and more than $650,000 in annual recurring
costs in connection with automating the classification process for over
63,000 portfolio positions.\1250\ This commenter also expressed the
belief that substantial resources, including additional investment
professionals and

compliance personnel, and additional expenses associated with third-
party service providers would increase costs associated with the
classification requirement.\1251\ Some commenters also expressed
concern that the costs of diverting resources and key personnel were
not considered in the Commission's cost estimates.\1252\
---------------------------------------------------------------------------

    \1248\ See, e.g., CFA Comment Letter; Federated Comment Letter;
ICI Comment Letter; Voya Comment Letter.
    \1249\ See T. Rowe Comment Letter (noting that its fund complex
has just under 44,000 portfolio positions combined as of December
31, 2015).
    \1250\ See Invesco Comment Letter.
    \1251\ Id.
    \1252\ See, e.g., Dechert Comment Letter; ICI Comment Letter I;
Nuveen Comment Letter; Wells Fargo Comment Letter.
---------------------------------------------------------------------------

    As discussed above, we are adopting a liquidity classification
requirement under rule 22e-4 with a number of modifications to address
commenters' concerns. Unlike the proposal which would have applied to
all open-end funds, In-Kind ETFs are not subject to the classification
requirements under rule 22e-4(b)(ii). The classification categories
have been reduced from six to four and the timeframe for projections
substantially reduced, with the fourth category designated for those
investments that qualify as ``illiquid investments'' harmonized with
the codified 15% illiquid investment limit. Furthermore, a fund may
classify portfolio investments based on asset class, rather than
position-by-position, so long as the fund or its adviser does not have
information about any market, trading, or investment-specific
considerations that are reasonably expected to significantly affect the
liquidity characteristics of an investment and would suggest a
different classification for that investment.
    We believe that these modifications to the liquidity classification
requirements will reduce the number of funds subject to the liquidity
classification requirements and will address some of the costs
commenters anticipate funds and fund shareholders would bear to
establish new operational, trade, and other systems to process and
report fund liquidity classification information. However, we
recognize, as discussed above, that several commenters suggested that
implementation of liquidity classification systems would be more costly
than we estimated. Accordingly, we believe, on balance, that the per
fund estimates that we proposed are reasonable and are not reducing
them, despite having adopted some modifications to rule 22e-4 that we
believe reduce the burden relative to the proposal.
    We estimate that 9,347 funds, rather than 8,734 funds, will be
required to file, on a monthly basis, additional information on Form N-
PORT as a result of the modifications to Form N-PORT to require
additional liquidity information.\1253\ We continue to expect that
funds will incur a one-time internal burden to initially classify a
fund's portfolio securities and program new and/or existing systems to
conduct the ongoing classifications and reviews required under rule
22e-4 for reporting purposes. We continue to estimate that each fund
will incur an average one-time burden of 54 hours, at a time cost of
$15,576, rather than $15,330 based on updated data concerning funds and
fund personnel salaries.\1254\ Amortized over a three-year period, we
estimate that this will result in an average annual hour burden of
approximately 18 burden hours, and a time cost of $5,192, rather than
$5,110.\1255\
---------------------------------------------------------------------------

    \1253\ This is based on estimates that there are 9,039 open-end
mutual funds (excluding money market funds) and 1,594 ETFs as of the
end of 2015. See supra footnote 1045 and accompanying text. Based on
staff experience, we estimate that more than 75% of ETFs or 1,196
ETFs will identify as In-Kind ETFs and thus will not be subject to
the classification requirement. 9,039 + (1,594 - 1,196) = 9,437.
    \1254\ We estimate that these systems modifications will include
the following costs: (i) Project planning and systems design (24
hours x $264 (hourly rate for a senior systems analyst) = $6,336)
and (ii) systems modification integration, testing, installation and
deployment (30 hours x $308 (hourly rate for a senior programmer) =
$9,240. $6,336 + $9,240 = $15,576.
    \1255\ $15,576 / 3 = $5,192.
---------------------------------------------------------------------------

2. Reporting on Form N-PORT
    In addition to the classification and review of securities, we
estimated in the Proposing Release that 8,734 \1256\ funds would be
required to file, on a monthly basis, additional information on Form N-
PORT. We estimated that each fund that files reports on Form N-PORT in
house (35%, or 3,057 funds) would require an average of approximately 3
burden hours to compile (including review of the information), tag, and
electronically file the additional information in light of the proposed
additions regarding liquidity information for the first time and an
average of approximately 1 burden hours for subsequent filings.
Therefore, we estimated the per fund average annual hour burden
associated with the incremental changes to Form N-PORT as a result of
the proposed additions for these funds would be an additional 14 hours
for the first year \1257\ and an additional 12 hours for each
subsequent year.\1258\ Amortized over three years, we estimated that
the average annual hour burden would be an additional 12.67 hours per
fund.\1259\
---------------------------------------------------------------------------

    \1256\ See Proposing Release, supra footnote 9, at section V.E.
There were 8,734 open-end funds (excluding money market funds, and
including ETFs) as of the end of 2014. See 2016 ICI Fact Book, supra
footnote 11, at 177, 184.
    \1257\ The estimate was based on the following calculation: (1
filing x 3 hours) + (11 filings x 1 hour) = 14 burden hours in the
first year.
    \1258\ This estimate was based on the following calculation: 12
filings x 1 hour = 12 burden hours in each subsequent year.
    \1259\ The estimate was based on the following calculation: (14
+ (12 x 2)) / 3 = 12.67.
---------------------------------------------------------------------------

    In the Proposing Release, we also estimated that 65% of funds
(5,677) would retain the services of a third party to provide data
aggregation, validation and/or filing services as part of the
preparation and filing of reports on proposed Form N-PORT on the fund's
behalf.\1260\ For these funds, we estimated that each fund would
require an average of approximately 4 hours to compile and review the
information with the service provider prior to electronically filing
the report for the first time and an average of 0.5 burden hours for
subsequent filings.
---------------------------------------------------------------------------

    \1260\ Proposing Release, supra footnote 9.
---------------------------------------------------------------------------

    Therefore, in the Proposing Release, we estimated that the per-fund
average annual hour burden associated with the incremental changes to
proposed Form N-PORT as a result of the proposed additions related to
liquidity information for these funds would be an additional 9.5 hours
for the first year \1261\ and an additional 6 hours for each subsequent
year.\1262\ Amortized over three years, we estimated that the average
aggregate annual hour burden would be an additional 7.17 hours per
fund.\1263\ In sum, we estimated that the proposed additions to Form N-
PORT would impose an average total annual hour burden of an additional
79,436.28 hours on applicable funds.\1264\ We did not anticipate any
change to the total external annual costs of $97,674,221 associated
with Form N-PORT.\1265\
---------------------------------------------------------------------------

    \1261\ The estimate was based on the following calculation: (1
filing x 4 hours) + (11 filings x 0.5 hour) = 9.5 burden hours in
the first year.
    \1262\ This estimate was based on the following calculation: 12
filings x 0.5 hour = 6 burden hours in each subsequent year.
    \1263\ The estimate was based on the following calculation: (9.5
+ (6 x 2)) / 3 = 7.17.
    \1264\ The estimate was based on the following calculation:
(3,057 funds x 12.67 hours) + (5,677 funds x 7.17 hours) = 79,436.28
hours.
    \1265\ See Proposing Release, supra footnote 9; see also
Investment Company Reporting Modernization Adopting Release, supra
footnote 120.
---------------------------------------------------------------------------

    As discussed in section V.E.2 above, many commenters expressed
concerns over the operational costs associated with the assignment of
liquidity classifications and the reporting of this information on Form
N-PORT. In addition, one commenter recommended that estimated costs to
purchase third-party liquidity assessment data be included in the total
estimated costs to comply with proposed rule given the

likelihood that many funds will subscribe to such services to
operationally comply with the rule 22e-4.\1266\
---------------------------------------------------------------------------

    \1266\ See Interactive Data Comment Letter.
---------------------------------------------------------------------------

    The Commission has modified the estimated increase in annual burden
hours and total time costs that will result from Form N-PORT and the
liquidity related amendments to Form N-PORT in consideration of
commenters' concerns that the Commission underestimated the operational
requirements for reporting and to reflect updates to the industry data
figures that were utilized in the Proposing Release. We estimate that
9,347 funds would be required to file, on a monthly basis, additional
information on Form N-PORT as a result of the additional liquidity-
related reporting items adopted today.\1267\
---------------------------------------------------------------------------

    \1267\ See footnote 1253 and accompanying text.
---------------------------------------------------------------------------

    We estimate that each fund that files reports on Form N-PORT in
house (35%, or 3,271) will require an average of approximately 6 burden
hours, rather than 3 burden hours, to compile (including review of the
information), tag, and electronically file the additional liquidity
information required on Form N-PORT for the first time and an average
of approximately 2 burden hours, rather than 1 burden hour, for
subsequent filings. Therefore, we estimate the per fund average annual
hour burden associated with the incremental changes to Form N-PORT as a
result of the added liquidity information for these funds would be an
additional 28 hours, rather than 14 hours for the first year \1268\ and
an additional 24 hours for each subsequent year.\1269\ Amortized over
three years, the average annual hour burden would be an additional
25.33 hours per fund.\1270\
---------------------------------------------------------------------------

    \1268\ The estimate is based on the following calculation: (1
filing x 6 hours) + (11 filings x 2 hour) = 28 burden hours in the
first year.
    \1269\ This estimate is based on the following calculation: 12
filings x 2 hour = 24 burden hours in each subsequent year.
    \1270\ The estimate is based on the following calculation: (28 +
(24 x 2)) / 3 = 25.33.
---------------------------------------------------------------------------

    We further estimate that 65% of funds (9,076) will retain the
services of a third party to provide data aggregation, validation and/
or filing services as part of the preparation and filing of reports on
Form N-PORT on the fund's behalf. For these funds, we estimate that
each fund will require an average of approximately 8 hours, rather than
4 hours, to compile and review the added liquidity-related information
with the service provider prior to electronically filing the report for
the first time and an average of 1 burden hour, rather than 0.5 burden
hours, for subsequent filings. Therefore, we estimate the per fund
average annual hour burden associated with the liquidity-related
changes to Form N-PORT for these funds would be an additional 19 hours,
rather than 9.5 hours, for the first year \1271\ and an additional 12
hours, rather than 6 hours, for each subsequent year.\1272\ Amortized
over three years, the average aggregate annual hour burden would be an
additional 14.33 hours per fund, rather than 7.17 hours per fund.\1273\
---------------------------------------------------------------------------

    \1271\ The estimate is based on the following calculation: (1
filing x 8 hours) + (11 filings x 1 hour) = 19 burden hours in the
first year.
    \1272\ This estimate is based on the following calculation: 12
filings x 1 hour = 12 burden hours in each subsequent year.
    \1273\ The estimate is based on the following calculation: (19 +
(12 x 2)) / 3 = 14.33.
---------------------------------------------------------------------------

    In sum, we estimate that the adopted additional liquidity reporting
information on Form N-PORT will impose an average total annual hour
burden of an additional 169,923.51 hours, rather than 79,436.28 hours,
on applicable funds.\1274\ As we stated in the Proposing Release, we
believe that the changes to Form N-PORT associated with reporting
liquidity classifications will not result in third party service
providers charging additional fees above those estimated in the
Investment Company Modernization Proposing Release. Therefore, we have
revised our estimates of number of funds affected as discussed
previously, but are continuing to estimate the same external costs for
hiring third party service providers as in the Investment Company
Modernization Adopting Release. Accordingly, we estimate that the total
external annual cost burden of compliance with the information
collection requirements of Form N-PORT will be $103,787,680, or $9,118
per fund.\1275\
---------------------------------------------------------------------------

    \1274\ The estimate is based on the following calculation:
(3,271 funds x 25.33 hours) + (6,076 funds x 14.33 hours) =
169,923.51 hours.
    \1275\ See Investment Company Reporting Modernization Adopting
Release, supra footnote 120.
---------------------------------------------------------------------------

D. Form N-LIQUID and Rule 30b1-10

    As discussed above, we are adopting a new requirement that open-end
investment companies, including In-Kind ETFs but not including money
market funds, file a current report on Form N-LIQUID on a non-public
basis when certain events related to their liquidity occur.\1276\
Similar to Form 8-K under the Exchange Act,\1277\ or Form N-CR under
the Investment Company Act for money market funds,\1278\ Form N-LIQUID
requires disclosure, by means of a current report filed with the
Commission, of certain specific reportable events. The information
reported on Form N-LIQUID concerns events under which more than 15% of
a fund's or In-Kind ETF's net assets are, or become, illiquid
investments that are assets as defined in rule 22e-4 and when holdings
in illiquid investments are assets that previously exceeded 15% of a
fund's net assets have changed to be less than or equal to 15% of the
fund's net assets.\1279\ The information reported on Form N-LIQUID also
regards events under which a fund's holdings in assets that are highly
liquid investments fall below the fund's highly liquid investment
minimum for more than 7 consecutive calendar days. A report on Form N-
LIQUID is required to be filed, as applicable, within one business day
of the occurrence of one or more of these events.\1280\
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    \1276\ This requirement will be implemented through our adoption
of new rule 30b1-10, which requires funds to file a report on new
Form N-LIQUID in certain circumstances. See rule 30b1-10; Form N-
LIQUID. For purposes of the PRA analysis, therefore, the burden
associated with the requirements of rule 30b1-10 is included in the
collection of information requirements of Form N-LIQUID.
    \1277\ 17 CFR 249.308.
    \1278\ 17 CFR 270.30b1-8.
    \1279\ See Item C.1 and Item C.2 of Part A of Form N-LIQUID.
    \1280\ See General Instruction A.2 of Form N-LIQUID.
---------------------------------------------------------------------------

    This reporting requirement on Form N-LIQUID is a collection of
information under the PRA. The information provided on Form N-LIQUID
will enable the Commission to receive information on fund liquidity
events more uniformly and efficiently and will enhance the Commission's
oversight of funds when significant liquidity events occur and its
ability to respond to market events. The Commission will be able to use
the information provided on Form N-LIQUID in its regulatory, disclosure
review, inspection, and policymaking roles. This collection of
information will be kept confidential.
    The staff estimates that the Commission will receive, in the
aggregate, an average of 30 reports \1281\ per year filed in response
to an event specified on Part B (``Above 15% Illiquid Investments''),
an average of 30 reports \1282\ per year filed in response to an event
specified on Part C (``At or Below 15% Illiquid Investments''), and

an average of 30 reports \1283\ per year filed in response to an event
specified on Part D (``Highly Liquid Investments Below the Highly
Liquid Investment Minimum'') of the form.
---------------------------------------------------------------------------

    \1281\ Commission staff estimates this figure based, in part, by
reference to the total of 28 Form N-CR filings received by the
Commission from mid-July 2015 to mid-July 2016. We recognize that
the circumstances under which money market funds report events on
Form N-CR are not the same as the liquidity events reported on Form
N-LIQUID and that reported occurrences may be less than or more than
30. We believe, however, that Form N-CR provides a helpful guidepost
for estimation purposes and believe an estimation of 30 reports is
appropriate for purposes of this PRA.
    \1282\ See id.
    \1283\ See id.
---------------------------------------------------------------------------

    When filing a report on Form N-LIQUID,\1284\ staff estimates that a
fund will spend on average approximately 4 hours \1285\ of an in-house
attorney's time and one \1286\ hour of an in-house accountant's time to
prepare, review, and submit Form N-LIQUID, at a total time cost of
$1,745.\1287\ Accordingly, in the aggregate, staff estimates that
compliance with new rule 30b1-10 and Form N-LIQUID will result in a
total annual burden of approximately 450 burden hours and total annual
time costs of approximately $157,050.\1288\ Given an estimated 10,633
funds will be required to comply with new rule 30b1-10 and Form N-
LIQUID,\1289\ this would result in an annual burden of approximately
0.04 burden hours and annual time costs of approximately $15 on a per-
fund basis. Staff estimates that there will be no external costs
associated with this collection of information.
---------------------------------------------------------------------------

    \1284\ For purposes of this estimate, the staff expects that it
would take approximately the same amount of time to prepare and file
a report on Form N-LIQUID, regardless under which Part of Form N-
LIQUID it is filed.
    \1285\ This estimate is derived in part from our current PRA
estimate for Form N-CR and Form 8-K.
    \1286\ Id.
    \1287\ This estimate is based on the following calculations: (4
hours x $386/hour for an attorney = $1,544), plus (1 hour x $201/
hour for a senior accountant = $201), for a combined total of 5
hours at total time costs of $1,745.
    \1288\ This estimate is based on the following calculations: (30
reports filed per year with respect to Part B) + (30 reports filed
per year with respect to Part C) + (30 reports filed per year with
respect to Part D) = 90 reports filed per year. 90 reports filed per
year x 5 hours per report = approximately 450 total annual burden
hours. 90 reports filed per year x $1,745 in costs per report =
$157,050 total annual costs.
    \1289\ This estimate is based on the number of funds the staff
estimates will be required to file reports on Form N-PORT with the
Commission. For purposes of this PRA, the staff assumes that the
universe of funds affected by rule 30b1-9 for Form N-PORT would be
similar to the universe of funds affected by rule 30b1-10 for Form
N-LIQUID.
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E. Form N-CEN

    On May 20, 2015, we proposed to amend rule 30a-1 to require all
funds to file reports with certain census-type information on proposed
Form N-CEN with the Commission on an annual basis. Proposed Form N-CEN
would have been a collection of information under the PRA, and was
designed to facilitate the Commission's oversight of funds and its
ability to monitor trends and risks. The collection of information
under Form N-CEN would be mandatory for all funds, and responses would
not be kept confidential.
    In the Investment Company Reporting Modernization Proposing
Release, we estimated that the average annual hour burden per response
for proposed Form N-CEN for the first year would be 32.37 hours and
12.37 hours in subsequent years.\1290\ Amortizing the burden over three
years, we estimated that the average annual hour burden per fund per
year would be 19.04 and the total average annual hour burden would be
59,900 hours.\1291\ We also estimated that all applicable funds would
incur, in the aggregate, external annual costs of $1,748,637, which
would include the costs of registering and maintaining LEIs for funds.
---------------------------------------------------------------------------

    \1290\ Investment Company Reporting Modernization Proposing
Release, supra footnote 120.
    \1291\ Id. at n.765 and accompanying text.
---------------------------------------------------------------------------

    We are adopting, substantially as proposed, amendments to Form N-
CEN to enhance the reporting of a fund's liquidity risk management
practices. Specifically, the amendments to Form N-CEN will require a
fund to report information about lines of credit, but in a modification
to the proposal, funds will report about both committed and uncommitted
lines of credit.\1292\ As proposed, funds will be required to report
information such as the size of the line of credit, the number of days
that the line of credit was used, and the identity of the institution
with whom the line of credit is held.\1293\ The amendments to Form N-
CEN also will require a fund to report whether it engaged in interfund
lending or interfund borrowing.\1294\ In addition, amendments to Form
N-CEN will require an ETF to report whether it qualifies as an ``In-
Kind ETF'' for purposes of rule 22e-4.\1295\
---------------------------------------------------------------------------

    \1292\ See Item C.20.a. of Form N-CEN.
    \1293\ See Id.
    \1294\ See Item C.20.b. of Form N-CEN.
    \1295\ See Item E.5 of Form N-CEN. We do not estimate any change
in burden as a result of Item E.5 of Form N-CEN because the item
only requires a yes or no response. In the Proposing Release, we
also proposed to add to Form N-CEN a requirement for funds to report
whether the fund required that an authorized participant post
collateral to the fund or any of its designated service providers in
connection with the purchase or redemption of fund shares during the
reporting period. We are adopting this requirement in the Reporting
Modernization Release. See supra footnote 898.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated that 8,734 funds would be
required to file responses on Form N-CEN as a result of the proposed
amendments to the form. We estimated that the average annual hour
burden per additional response to Form N-CEN as a result of the
proposed amendments would be 0.5 hour per fund per year for a total
average annual hour burden of 4,367 hours.\1296\ We did not estimate
any change to the external costs associated with proposed Form N-CEN.
---------------------------------------------------------------------------

    \1296\ This estimate was based on the following calculation:
8,734 funds x 0.5 hours = 4,367 hours.
---------------------------------------------------------------------------

    We did not receive any comments on these estimated hour and cost
burdens. The Commission has modified the estimated increase in annual
burden hours and total time costs that will result from the amendments
based on the modifications to the proposal to require funds to report
information on uncommitted lines of credit in addition to committed
lines of credit as well as in light of updated data concerning funds
and fund personnel salaries. We estimate that 10,633 funds, rather than
8,734 funds will be required to file responses on Form N-CEN as a
result of the amendments to the form based on updates to the industry
data figures that were utilized in the Proposing Release.\1297\ We
estimate that the average annual hour burden per additional response to
Form N-CEN as a result of the adopted additions to Form N-CEN will be
one hour per fund per year, instead of 0.5 hour per fund per year, for
a total average annual hour burden of 10,633, rather than 4,367
hours.\1298\ We do not estimate any change to the external costs
associated with proposed Form N-CEN.
---------------------------------------------------------------------------

    \1297\ See 2016 ICI Fact Book, supra footnote 11, at 22, 176,
183.
    \1298\ This estimate is based on the following calculation:
10,633 funds x 1 hour = 10,633 hours.
---------------------------------------------------------------------------

F. Form N-1A

    Form N-1A is the registration form used by open-end investment
companies. The respondents to the amendments to Form N-1A adopted today
are open-end management investment companies registered or registering
with the Commission. Compliance with the disclosure requirements of
Form N-1A is mandatory, and the responses to the disclosure
requirements are not confidential. We currently estimate for Form N-1A
a total hour burden of 1,579,974 hours, and the total annual external
cost burden is $124,820,197.\1299\
---------------------------------------------------------------------------

    \1299\ These estimates are based on the last time the rule's
information collections were submitted for PRA renewal in 2014.
---------------------------------------------------------------------------

    We are adopting amendments to Form N-1A that require funds to
disclose additional information concerning the procedures for redeeming
a fund's shares. Funds will be required to describe the number of days
following receipt of shareholder redemption requests in which the fund
reasonably

expects to pay redemption proceeds to redeeming shareholders.\1300\
Funds also will be required to describe the methods used to meet
redemption requests in stressed and non-stressed market
conditions.\1301\ Funds, however, will not be required to file as
exhibits to their registration statements credit agreements as
originally proposed. Overall, we believe that requiring funds to
provide this additional disclosure regarding redemption procedures will
provide Commission staff, investors, and market participants with
improved information about the procedures funds use to meet their
redemption obligations.
---------------------------------------------------------------------------

    \1300\ See Item 11(c)(7) of Form N-1A.
    \1301\ See Item 11(c)(8) of Form N-1A.
---------------------------------------------------------------------------

    Form N-1A generally imposes two types of reporting burdens on
investment companies: (i) The burden of preparing and filing the
initial registration statement; and (ii) the burden of preparing and
filing post-effective amendments to a previously effective registration
statement (including post-effective amendments filed pursuant to rule
485(a) or 485(b) under the Securities Act, as applicable). In the
Proposing Release, we estimated that each fund would incur a one-time
burden of an additional 2 hours,\1302\ at a time cost of an additional
$637,\1303\ to draft and finalize the required disclosure and amend its
registration statement in response to the proposed Form N-1A disclosure
requirements. In aggregate, we estimated that funds would incur a one-
time burden of an additional 17,468 hours,\1304\ at a time cost of an
additional $5,563,558,\1305\ to comply with the Form N-1A disclosure
requirements originally proposed. We estimated that amortizing the one-
time burden over a three-year period would result in an average annual
burden of an additional 5,823 hours at a time cost of an additional
$1,854,519.\1306\
---------------------------------------------------------------------------

    \1302\ This estimate was based on the following calculation: 1
hour to update registration statement to include swing pricing-
related disclosure statements + 1 hour to update registration
statement disclosure about redemption procedures = 2 hours.
    \1303\ This estimate was based on the following calculation: 2
hours x $318.5 (blended rate for a compliance attorney ($334) and a
senior programmer ($303)) = $637.
    \1304\ This estimate was based on the following calculations: 2
hours x 8,734 funds = 17,468 hours.
    \1305\ This estimate was based on the following calculation:
17,468 hours x $318.50 (blended rate for a compliance attorney
($334) and a senior programmer ($303)) = $5,563,558.
    \1306\ This estimate was based on the following calculation:
17,468 hours / 3 = 5,823 average annual burden hours; $5,563,558
burden costs / 3 = $1,854,519 average annual burden cost.
---------------------------------------------------------------------------

    In the Proposing Release, we also estimated that each fund would
incur an ongoing burden of an additional 0.25 hours, at a time cost of
an additional $80,\1307\ each year to review and update the proposed
disclosure in response to Item 11 and Item 28 of Form N-1A regarding
the pricing and redemption of fund shares and the inclusion of credit
agreements as exhibits, respectively. In aggregate, we estimated that
funds would incur an annual burden of an additional 2,184 hours,\1308\
at a time cost of an additional $695,604,\1309\ to comply with the
proposed Form N-1A disclosure requirements.
---------------------------------------------------------------------------

    \1307\ This estimate was based on the following calculations:
0.25 hours x $318.50 (blended hourly rate for a compliance attorney
($334) and a senior programmer ($303)) = $79.63.
    \1308\ This estimate was based on the following calculation:
0.25 hours x 8,734 funds = 2,183.5 hours.
    \1309\ This estimate was based on the following calculation:
2,184 hours x $318.50 (blended hourly rate for a compliance attorney
($334) and a senior programmer ($303)) = $695,604.
---------------------------------------------------------------------------

    In the Proposing Release, we further estimated that amortizing
these one-time and ongoing hour and cost burdens over three years would
result in an average annual increased burden of approximately 0.50
hours per fund,\1310\ at a time cost of $265.42 per fund.\1311\
---------------------------------------------------------------------------

    \1310\ This estimate was based on the following calculation: 1
burden hour (year 1) + 0.25 burden hour (year 2) + 0.25 burden hour
(year 3) / 3 = 0.50 hours.
    \1311\ This estimate was based on the following calculation:
$637 (year 1 monetized burden hours) + $79.63 (year 2 monetized
burden hours) + $79.63 (year 3 monetized burden hours) / 3 =
$265.42.
---------------------------------------------------------------------------

    In total, we estimated in the Proposing Release that funds would
incur an average annual increased burden of approximately 8,007
hours,\1312\ at a time cost of approximately $2,550,123,\1313\ to
comply with the proposed Form N-1A disclosure requirements. We did not
estimate any change to the external costs associated with the proposed
amendments to Form N-1A.
---------------------------------------------------------------------------

    \1312\ This estimate was based on the following calculation:
5,823 hours + 2,184 hours = 8,007 hours.
    \1313\ This estimate was based on the following calculation:
$1,854,519 + $695,604 = $2,550,123.
---------------------------------------------------------------------------

    One commenter stated that the cost estimates under the proposal
were overly optimistic, including as an example our estimated $637 cost
per fund to implement the proposed Form N-1A disclosure
requirements.\1314\ As discussed above, our amendments to Form N-1A
include several modifications or clarifications from the proposal that
address concerns raised by commenters and that are intended, in part,
to decrease implementation burdens relative to the proposal. For
example, we are not adopting the proposed requirement that funds file
credit agreements as exhibits to their registration statements.
Furthermore, instead of a requirement for funds to disclose the exact
number of days in which a fund would pay redemption proceeds, including
the number of days that apply for each distribution channel of the
fund, funds are required to disclose the number of days a fund
reasonably expects to pay redemption proceeds and are not required to
account for all distribution channels, only varied payment methods, if
applicable. We believe that these modifications will increase the
quality of information provided to fund shareholders about the timing
of their redemption proceeds and, at the same time, reduce the
likelihood that disclosures regarding such timing will be overly
granular and complex for investors and overly burdensome for
registrants.
---------------------------------------------------------------------------

    \1314\ See FSR Comment Letter (noting that changes to a fund's
disclosure typically involve a number of stakeholders and several
rounds of drafting and review, such that costs associated with even
modest changes to fund disclosure can have a serious cost
component). With the exception of this comment, we did not receive
comments on the estimated hour and costs burdens associated with the
disclosure amendments to Form N-1A under the proposal.
---------------------------------------------------------------------------

    We believe that certain modifications from and clarifications to
the proposal that we are adopting today as well as the removal of the
swing pricing disclosure requirements from this Release will generally
reduce the estimated burden hours and costs associated with the adopted
amendments to Form N-1A relative to the proposal. Furthermore, we have
considered the concern expressed by one commenter that the burdens and
costs estimated in the proposal were overly optimistic and believe that
any possible underestimates in burdens and costs expressed in the
proposal have been offset by the adopted modifications that reduce such
burdens. For these reasons, we believe that the amendments to Form N-1A
adopted today, including modifications from the proposal, will reduce
the estimated burden hours and costs stated in the Proposing Release.
    We estimate that each fund will incur a one-time burden of an
additional hour, rather than 2 hours, to draft and finalize the
required disclosure and amend its registration statement,\1315\ but at
a time cost of an additional $324, rather than $637,\1316\ based on
updated data concerning funds and fund personnel salaries and the
removal of the swing pricing disclosure requirement. In

aggregate, we estimate that funds will incur a one-time burden of an
additional 11,114 hours,\1317\ rather than 17,468 hours, at a time cost
of an additional $3,600,936,\1318\ rather than $5,563,558, to comply
with the Form N-1A disclosure requirements as adopted. We estimate that
amortizing the one-time burden over a three-year period will result in
an average annual burden of an additional 3,705 hours, rather than
5,823 hours at a time cost of an additional $1,200,312, rather than
$1,854,519.\1319\
---------------------------------------------------------------------------

    \1315\ This estimate is based on the following calculation: 1
hour to update registration statement disclosure about redemption
procedures = 1 hour.
    \1316\ This estimate is based on the following calculation: 1
hour x $324 (blended rate for a compliance attorney ($340) and a
senior programmer ($308)) = $324.
    \1317\ This estimate was based on the following calculations: 1
hour x 11,114 funds (including money market funds and ETFs) = 11,114
hours.
    \1318\ This estimate is based on the following calculation:
11,114 hours x $324 (blended rate for a compliance attorney ($340)
and a senior programmer ($308)) = $3,600,936.
    \1319\ This estimate is based on the following calculation:
11,114 hours / 3 = 3,704.67 average annual burden hours; $3,600,936
burden costs / 3 = $1,200,312 average annual burden cost.
---------------------------------------------------------------------------

    In addition, we estimate that each fund will incur an ongoing
burden of an additional 0.25 hours, but at a time cost of an additional
$81,\1320\ each year to review and update disclosures required in
response to the amendments to Form N-1A. In aggregate, we estimate that
funds will incur an annual burden of an additional 2,778.50
hours,\1321\ at a time cost of an additional $900,234,\1322\ to comply
with the Form N-1A disclosure requirements adopted today.
---------------------------------------------------------------------------

    \1320\ This estimate is based on the following calculations:
0.25 hours x $324 (blended hourly rate for a compliance attorney
($340) and a senior programmer ($308)) = $81.
    \1321\ This estimate is based on the following calculation: 0.25
hours x 11,114 funds = 2,778.50 hours.
    \1322\ This estimate is based on the following calculation:
2,778.50 hours x $324 (blended hourly rate for a compliance attorney
($340) and a senior programmer ($308)) = $900,234.
---------------------------------------------------------------------------

    Furthermore, we estimate that amortizing these one-time and ongoing
hour and cost burdens over three years will result in an average annual
increased burden of approximately 0.50 hours per fund,\1323\ at a time
cost of $162 per fund.\1324\
---------------------------------------------------------------------------

    \1323\ This estimate is based on the following calculation: 1
burden hour (year 1) + 0.25 burden hour (year 2) + 0.25 burden hour
(year 3) / 3 = 0.50 hours.
    \1324\ This estimate is based on the following calculation: $324
(year 1 monetized burden hours) + $81 (year 2 monetized burden
hours) + $81 (year 3 monetized burden hours) / 3 = $162.
---------------------------------------------------------------------------

    In total, we estimate that funds will incur an average annual
increased burden of approximately 6,483.17 hours,\1325\ at a time cost
of approximately $3,300,858,\1326\ to comply with the Form N-1A
disclosure requirements adopted today. We do not estimate any change to
the external costs associated with these amendments to Form N-1A.
---------------------------------------------------------------------------

    \1325\ This estimate is based on the following calculation:
3,704.67 hours + 2,778.50 hours = 6,483.17 hours.
    \1326\ This estimate is based on the following calculation:
$1,200,312 + $900,234 = $2,100,546.
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Act Analysis

    This Final Regulatory Flexibility Analysis has been prepared in
accordance with section 3 of the Regulatory Flexibility Act
(``RFA'').\1327\ It relates to: new rule 22e-4; new Rule 30b-10, Form
N-LIQUID; and amendments to Form N-1A, Form N-PORT, and Form N-CEN. We
prepared an Initial Regulatory Flexibility Analysis (``IRFA'') in
conjunction with the Proposing Release in September 2015.\1328\ The
Proposing Release included, and solicited comment, on the IRFA. In the
Proposing Release, we also proposed amendments to rule 22c-1, rule 31a-
2, and Form N-1A as well as additions to Form N-CEN regarding the use
of swing pricing.\1329\
---------------------------------------------------------------------------

    \1327\ 5 U.S.C. 604.
    \1328\ See Proposing Release, supra footnote 9, at section VI.
    \1329\ See Proposing Release, supra footnote 9, at section
III.G.1.b.
---------------------------------------------------------------------------

A. Need for the Rule

    With the exception of money market funds, open-end funds (including
both in-kind and other ETFs) and UITs are not currently subject to
requirements under the federal securities laws or Commission rules that
specifically require them to manage their liquidity risk,\1330\
although there are guidelines stating that such entities should limit
their investments in illiquid assets.\1331\ In addition, funds are only
subject to limited disclosure and reporting requirements concerning a
fund's liquidity risk and risk management.\1332\ We understand that
funds today engage in a variety of different practices, with varying
levels of comprehensiveness, for classifying the liquidity of their
portfolio investments, assessing and managing liquidity risk, and
disclosing information about their liquidity risk, redemption
practices, and liquidity risk management practices to investors.\1333\
---------------------------------------------------------------------------

    \1330\ See supra sections II.D and IV.B.1.a.
    \1331\ See id.
    \1332\ See supra sections II.D and IV.B.1.c.
    \1333\ See supra sections II.D, IV.B.1.a and IV.B.1.c.
---------------------------------------------------------------------------

    The Commission is adopting a new rule, amendments to current rules,
a new form and amendments to current forms to promote effective
liquidity risk management throughout the open-end fund industry and
thereby reduce the risk that funds will be unable to meet redemption
obligations and mitigate dilution of the interests of fund
shareholders. The changes also seek to enhance disclosure regarding
fund liquidity and redemption practices. Specifically, a primary
objective of these liquidity regulations is to promote shareholder
protection by elevating the overall quality of liquidity risk
management across the fund industry, as well as by increasing
transparency of funds' liquidity risks and risk management. The
liquidity regulations are also intended to lessen the possibility of
investor dilution created by insufficient liquidity risk management.
Finally, the liquidity regulations are meant to address recent industry
developments that have underscored the significance of funds' liquidity
risk management practices. Each of these objectives is discussed in
detail in section III above.

B. Significant Issues Raised by Public Comment

    In the Proposing Release, we requested comment on the IRFA,
requesting in particular comment on the number of small entities that
would be subject to the proposed liquidity regulations and whether the
proposed liquidity regulations would have any effects that have not
been discussed. We requested that commenters describe the nature of any
effects on small entities subject to the proposed liquidity regulations
and provide empirical data to support the nature and extent of such
effects. We also requested comment on the estimated compliance burdens
of the proposed liquidity regulations and how they would affect small
entities. We received a number of comments related to the impact of our
proposal on small entities, with some commenters expressing concern
that liquidity risk management programs, as proposed, would require
building entirely new systems and/or maintaining parallel system, which
certain of the commenters believed could generate disproportionate
burdens on small funds.\1334\ We discuss these costs in detail in
section V., above, and conclude that such costs are justified by the
benefits of liquidity risk management programs.
---------------------------------------------------------------------------

    \1334\ See Dechert Comment Letter; ICI Comment Letter I; SIFMA
Comment Letter I; T. Rowe Comment Letter.
---------------------------------------------------------------------------

C. Small Entities Subject to the Rule

    An investment company is a small entity if, together with other
investment companies in the same group of related investment companies,
it has net assets of $50 million or less as of the end of its most
recent fiscal year.\1335\ Commission staff estimates that, as of

December 31, 2015, there were 78 small open-end investment companies
(within 76 fund complexes) that would be considered small entities;
this number includes open-end ETFs.
---------------------------------------------------------------------------

    \1335\ See rule 0-10(a) under the Act.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

1. New Rule 22e-4
    Rule 22e-4 generally requires each registered open-end fund (but
not including money market funds), including each small entity, to
establish a written liquidity risk management program.\1336\ A fund's
board will be required to approve the fund's liquidity risk management
program, as well as the fund's designation of the fund's investment
adviser or officers as responsible for administering the fund's
liquidity risk management program, and review a report on the program's
effectiveness no less than annually. In addition, for funds that do not
primarily hold assets that are highly liquid investments, the new rule
requires the determination of and periodic review of the fund's highly
liquid investment minimum and establishment of policies and procedures
for responding to a shortfall of the fund's highly liquid investment
minimum, which includes reporting to the fund's board of directors. The
new rule also requires a fund's liquidity risk management program to
incorporate certain specified elements.\1337\ Rule 22e-4 includes
tailored liquidity risk management program requirements for ETFs,
intended to target ETFs' unique risks while eliminating requirements
that are largely inapplicable to ETFs that redeem in kind.\1338\ The
rule also includes liquidity-related requirements for UITs, intended to
recognize the unmanaged structure of UITs while requiring that
principal underwriters or depositors of UITs to determine, on or before
the date of the initial deposit of portfolio securities into a UIT,
that the portion of the illiquid investments that the UIT holds or will
hold at the date of deposit that are assets is consistent with the
redeemable nature of the securities that it issues.\1339\ Rule 22e-4
also includes certain recordkeeping requirements.\1340\ We estimate
that 76 fund complexes are small fund groups that have funds that would
be required to comply with the proposed liquidity risk management
program requirement.\1341\ As discussed above, we estimate that a fund
complex would incur one-time costs ranging from $0.8 million to $10.2
million, depending on the fund's particular circumstances and current
liquidity risk management practices, to establish and implement a
liquidity risk management program.\1342\ We further estimate that a
fund complex would incur ongoing annual costs associated with proposed
rule 22e-4 that would range from $40,000 to $3.3 million.\1343\
Finally, we estimate that any UITs launched after the rule's compliance
date will incur one-time costs associated with rule 22e-4 of $8,000 to
$52,000.\1344\
---------------------------------------------------------------------------

    \1336\ See supra footnote 113.
    \1337\ See id. and accompanying and preceding text.
    \1338\ See id.
    \1339\ See supra section III.K.
    \1340\ See supra section III.I.
    \1341\ Commission staff estimate as of December 31, 2015.
    \1342\ See supra paragraph accompanying footnote 1101.
    \1343\ See supra paragraph accompanying footnote 1104.
    \1344\ See supra footnote 1116 and accompanying text.
---------------------------------------------------------------------------

2. Disclosure and Reporting Requirements Regarding Liquidity Risk and
Liquidity Risk Management
    New Form N-LIQUID, along with amendments to Form N-1A, Form N-PORT,
and Form N-CEN are intended to enhance fund disclosure and reporting
regarding a fund's redemption practices, portfolio liquidity, and
certain liquidity risk management practices. New Form N-LIQUID will
require a fund to confidentially notify the Commission if the fund's
illiquid investment holdings exceed 15% of its net assets or if its
highly liquid investments decline below its minimum for more than a
brief period of time.\1345\ The amendments to Form N-1A require funds
to disclose additional information concerning the procedures for
redeeming a fund's shares.\1346\ The amendments to Forms N-PORT and N-
CEN require reporting of certain information regarding the liquidity of
a fund's holdings and the fund's liquidity risk management practices.
We estimate that 78 funds are small entities that would be required to
comply with the proposed disclosure and reporting requirements.\1347\
---------------------------------------------------------------------------

    \1345\ See supra section III.L.2.
    \1346\ See supra section III.L.1.
    \1347\ Commission staff estimate as of December 31, 2015.
---------------------------------------------------------------------------

    As discussed above, for each fund, including a fund that is a small
entity, when filing a report on Form N-LIQUID, staff estimates that a
fund will spend on average approximately 4 hours \1348\ of an in-house
attorney's time and one \1349\ hour of an in-house accountant's time to
prepare, review, and submit Form N-LIQUID, at a total time cost of
$1,745.\1350\ Staff estimates that there will be no external costs
associated with this collection of information.
---------------------------------------------------------------------------

    \1348\ See supra footnote 1285 and accompanying text.
    \1349\ Id.
    \1350\ See supra footnote 1287 and accompanying text.
---------------------------------------------------------------------------

    As discussed above, we estimate that each fund, including funds
that are small entities, would incur a one-time burden of an additional
1 hour,\1351\ at a time cost of an additional $324 (plus printing
costs), to comply with the amendments to Form N-1A.\1352\ We also
estimate that each fund, including small entities, would incur an
ongoing burden of an additional 0.25 hours, at a time cost of
approximately an additional $81 each year associated with compliance
with the amendments to Form N-1A.\1353\ We do not estimate any change
to the external costs associated with the proposed amendments to Form
N-1A.
---------------------------------------------------------------------------

    \1351\ See supra footnote 1302 and accompanying text.
    \1352\ See supra footnote 1303 and accompanying text.
    \1353\ See supra footnote 1307 and accompanying text.
---------------------------------------------------------------------------

    We also estimate that each fund that files reports on Form N-PORT
(35% of funds) in house will require an average of approximately 6
burden hours to compile (including review of the information), tag, and
electronically file the additional liquidity information required on
Form N-PORT for the first time and an average of approximately 2 burden
hours, rather than 1 burden hour, for subsequent filings. Therefore, we
estimate the per fund average annual hour burden associated with the
incremental changes to Form N-PORT as a result of the added liquidity
information for these funds would be an additional 28 hours for the
first year and an additional 24 hours for each subsequent year.\1354\
Amortized over three years, the average annual hour burden would be an
additional 25.33 hours per fund.\1355\ We further estimate that 65% of
funds will retain the services of a third party to provide data
aggregation, validation and/or filing services as part of the
preparation and filing of reports on Form N-PORT on the fund's behalf.
For these funds, we estimate that each fund will require an average of
approximately 8 hours to compile and review the added liquidity-related
information with the service provider prior to electronically filing
the report for the first time and an average of 1 burden hour for
subsequent filings. Therefore, we estimate the per fund

average annual hour burden associated with the liquidity-related
changes to Form N-PORT for these funds would be an additional 19 hours
for the first year \1356\ and an additional 12 hours for each
subsequent year.\1357\ Amortized over three years, the average
aggregate annual hour burden would be an additional 14.33 hours per
fund.\1358\ We further estimate that the total external annual cost
burden of compliance with the information collection requirements of
Form N-PORT will be $9,118 per fund.\1359\
---------------------------------------------------------------------------

    \1354\ See supra footnote 1269 and accompanying paragraph.
    \1355\ See supra footnote 1270 and accompanying text.
    \1356\ See supra footnote 1271 and accompanying text.
    \1357\ See supra footnote 1272 and accompanying text.
    \1358\ See supra footnote 1273 and accompanying text.
    \1359\ See supra footnote 1275 and accompanying text.
---------------------------------------------------------------------------

    As discussed above, we also estimate that the average annual hour
burden per additional response to Form N-CEN as a result of the adopted
additions to Form N-CEN will be one hour per fund per year.\1360\ We do
not estimate any change to the external costs associated with proposed
Form N-CEN.\1361\
---------------------------------------------------------------------------

    \1360\ See supra footnote 1298 and accompanying paragraph.
    \1361\ Id.
---------------------------------------------------------------------------

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs the Commission to consider
significant alternatives that would accomplish the stated objective,
while minimizing any significant impact on small entities. Alternatives
in this category would include: (i) Establishing different compliance
or reporting standards that take into account the resources available
to small entities; (ii) clarifying, consolidating, or simplifying the
compliance requirements under the rules and amendments for small
entities; (iii) using performance rather than design standards; and
(iv) exempting small entities from coverage of the rules and
amendments, or any part of the rules and amendments.
    The Commission does not presently believe that these rules and
amendments would require the establishment of special compliance
requirements or timetables for small entities. These rules and
amendments are specifically designed to reduce any unnecessary burdens
on all funds (including small funds). To establish special compliance
requirements or timetables for small entities may in fact disadvantage
small entities by encouraging larger market participants to focus
primarily on the needs of larger entities when making the operational
changes envisioned by certain of the rules and amendments, and possibly
ignoring the needs of smaller funds.
    With respect to further clarifying, consolidating, or simplifying
the compliance requirements of the rules and amendments, using
performance rather than design standards, and exempting small entities
from coverage of these rules and amendments or any part of the rules
and amendments, we believe additional such changes would be
impracticable. Small entities are as vulnerable to the risks of being
unable to meet redemption obligations and of dilution of the interests
of fund shareholders as larger funds. We believe that the rules and
amendments are necessary to help mitigate these risks. Exempting small
funds from coverage under these rules and amendments or any part of the
rules and amendments could compromise the effectiveness of the rules
and amendments or any part of the rules and amendments.

VII. Statutory Authority and Text of Amendments

    The Commission is adopting new rule 22e-4 under the authority set
forth in sections 22(c), 22(e), 34(b) and 38(a) of the Investment
Company Act [15 U.S.C. 80a-22(c), 80a-22(e), 80a-35(b), and 80a-37(a)],
the Investment Advisers Act, particularly, section 206(4) thereof [15
U.S.C. 80b-6(4)], the Exchange Act, particularly section 10(b) thereof
[15 U.S.C. 78a et seq.], the Securities Act, particularly section 17(a)
thereof [15 U.S.C. 77a et seq.]. The Commission is adopting amendments
to Form N-1A, Form N-PORT, and Form N-CEN under the authority set forth
in the Securities Act, particularly section 19 thereof [15 U.S.C. 77a
et seq.], the Trust Indenture Act, particularly, section 19 thereof [15
U.S.C. 77aaa et seq.], the Exchange Act, particularly sections 10, 15,
and 23, and 35A thereof [15 U.S.C. 78a et seq.], and the Investment
Company Act, particularly, sections 8, and 38 thereof [15 U.S.C. 80a et
seq.].

List of Subjects in 17 CFR Parts 270 and 274

    Investment companies, Reporting and recordkeeping requirements,
Securities.
    For the reasons set out in the preamble, title 17, chapter II of
the Code of Federal Regulations is amended as follows:

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
1. The authority citation for part 270 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *

0
2. Section 270.22e-4 is added to read as follows:

Sec.  270.22e-4   Liquidity risk management programs.

    (a) Definitions. For purposes of this section:
    (1) Acquisition (or acquire) means any purchase or subsequent
rollover.
    (2) Business day means any day, other than Saturday, Sunday, or any
customary business holiday.
    (3) Convertible to cash means the ability to be sold, with the sale
settled.
    (4) Exchange-traded fund or ETF means an open-end management
investment company (or series or class thereof), the shares of which
are listed and traded on a national securities exchange, and that has
formed and operates under an exemptive order under the Act granted by
the Commission or in reliance on an exemptive rule adopted by the
Commission.
    (5) Fund means an open-end management investment company that is
registered or required to register under section 8 of the Act (15
U.S.C. 80a-8) and includes a separate series of such an investment
company, but does not include a registered open-end management
investment company that is regulated as a money market fund under Sec.
270.2a-7 or an In-Kind ETF.
    (6) Highly liquid investment means any cash held by a fund and any
investment that the fund reasonably expects to be convertible into cash
in current market conditions in three business days or less without the
conversion to cash significantly changing the market value of the
investment, as determined pursuant to the provisions of paragraph
(b)(1)(ii) of this section.
    (7) Highly liquid investment minimum means the percentage of the
fund's net assets that the fund invests in highly liquid investments
that are assets pursuant to paragraph (b)(1)(iii) of this section.
    (8) Illiquid investment means any investment that the fund
reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without the sale or
disposition significantly changing the market value of the investment,
as determined pursuant to the provisions of paragraph (b)(1)(ii) of
this section.
    (9) In-Kind Exchange Traded Fund or In-Kind ETF means an ETF that
meets redemptions through in-kind transfers

of securities, positions, and assets other than a de minimis amount of
cash and that publishes its portfolio holdings daily.
    (10) Less liquid investment means any investment that the fund
reasonably expects to be able to sell or dispose of in current market
conditions in seven calendar days or less without the sale or
disposition significantly changing the market value of the investment,
as determined pursuant to the provisions of paragraph (b)(1)(ii) of
this section, but where the sale or disposition is reasonably expected
to settle in more than seven calendar days.
    (11) Liquidity risk means the risk that the fund could not meet
requests to redeem shares issued by the fund without significant
dilution of remaining investors' interests in the fund.
    (12) Moderately liquid investment means any investment that the
fund reasonably expects to be convertible into cash in current market
conditions in more than three calendar days but in seven calendar days
or less, without the conversion to cash significantly changing the
market value of the investment, as determined pursuant to the
provisions of paragraph (b)(1)(ii) of this section.
    (13) Person(s) designated to administer the program means the fund
or In-Kind ETF's investment adviser, officer, or officers (which may
not be solely portfolio managers of the fund or In-Kind ETF)
responsible for administering the program and its policies and
procedures pursuant to paragraph (b)(2)(ii) of this section.
    (14) Unit Investment Trust or UIT means a unit investment trust as
defined in section 4(2) of the Act (15 U.S.C. 80a-4).
    (b) Liquidity Risk Management Program. Each fund and In-Kind ETF
must adopt and implement a written liquidity risk management program
(``program'') that is reasonably designed to assess and manage its
liquidity risk.
    (1) Required program elements. The program must include policies
and procedures reasonably designed to incorporate the following
elements:
    (i) Assessment, management, and periodic review of liquidity risk.
Each fund and In-Kind ETF must assess, manage, and periodically review
(with such review occurring no less frequently than annually) its
liquidity risk, which must include consideration of the following
factors, as applicable:
    (A) The fund or In-Kind ETF's investment strategy and liquidity of
portfolio investments during both normal and reasonably foreseeable
stressed conditions, including whether the investment strategy is
appropriate for an open-end fund, the extent to which the strategy
involves a relatively concentrated portfolio or large positions in
particular issuers, and the use of borrowings for investment purposes
and derivatives;
    (B) Short-term and long-term cash flow projections during both
normal and reasonably foreseeable stressed conditions;
    (C) Holdings of cash and cash equivalents, as well as borrowing
arrangements and other funding sources; and
    (D) For an ETF:
    (1) The relationship between the ETF's portfolio liquidity and the
way in which, and the prices and spreads at which, ETF shares trade,
including, the efficiency of the arbitrage function and the level of
active participation by market participants (including authorized
participants); and
    (2) The effect of the composition of baskets on the overall
liquidity of the ETF's portfolio.
    (ii) Classification. Each fund must, using information obtained
after reasonable inquiry and taking into account relevant market,
trading, and investment-specific considerations, classify each of the
fund's portfolio investments (including each of the fund's derivatives
transactions) as a highly liquid investment, moderately liquid
investment, less liquid investment, or illiquid investment. A fund must
review its portfolio investments' classifications, at least monthly in
connection with reporting the liquidity classification for each
portfolio investment on Form N-PORT in accordance with Sec.  270.30b1-
9, and more frequently if changes in relevant market, trading, and
investment-specific considerations are reasonably expected to
materially affect one or more of its investments' classifications.
    Note to paragraph (b)(1)(ii)introductory text: If an investment
could be viewed as either a highly liquid investment or a moderately
liquid investment, because the period to convert the investment to
cash depends on the calendar or business day convention used, a fund
should classify the investment as a highly liquid investment. For a
discussion of considerations that may be relevant in classifying the
liquidity of the fund's portfolio investments, see Investment
Company Act Release No. IC-32315 (Oct. 13, 2016).
    (A) The fund may generally classify and review its portfolio
investments (including the fund's derivatives transactions) according
to their asset class, provided, however, that the fund must separately
classify and review any investment within an asset class if the fund or
its adviser has information about any market, trading, or investment-
specific considerations that are reasonably expected to significantly
affect the liquidity characteristics of that investment as compared to
the fund's other portfolio holdings within that asset class.
    (B) In classifying and reviewing its portfolio investments or asset
classes (as applicable), the fund must determine whether trading
varying portions of a position in a particular portfolio investment or
asset class, in sizes that the fund would reasonably anticipate
trading, is reasonably expected to significantly affect its liquidity,
and if so, the fund must take this determination into account when
classifying the liquidity of that investment or asset class.
    (C) For derivatives transactions that the fund has classified as
moderately liquid investments, less liquid investments, and illiquid
investments, identify the percentage of the fund's highly liquid
investments that it has segregated to cover, or pledged to satisfy
margin requirements in connection with, derivatives transactions in
each of these classification categories.
    Note to paragraph (b)(1)(ii)(C): For purposes of calculating
these percentages, a fund that has segregated or pledged highly
liquid investments and non-highly liquid investments to cover
derivatives transactions classified as moderately liquid, less
liquid, or illiquid investments first should apply segregated or
pledged assets that are highly liquid investments to cover these
transactions, unless it has specifically identified segregated non-
highly liquid investments as covering such derivatives transactions.
    (iii) Highly liquid investment minimum. (A) Any fund that does not
primarily hold assets that are highly liquid investments must:
    (1) Determine a highly liquid investment minimum, considering the
factors specified in paragraphs (b)(1)(i)(A) through (D) of this
section, as applicable (but considering those factors specified in
paragraphs (b)(1)(i)(A) and (B) only as they apply during normal
conditions, and during stressed conditions only to the extent they are
reasonably foreseeable during the period until the next review of the
highly liquid investment minimum). The highly liquid investment minimum
determined pursuant to this paragraph may not be changed during any
period of time that a fund's assets that are highly liquid investments
are below the determined minimum without approval from the fund's board
of directors, including a majority of directors who are not interested
persons of the fund;

    (2) Periodically review, no less frequently than annually, the
highly liquid investment minimum; and
    (3) Adopt and implement policies and procedures for responding to a
shortfall of the fund's highly liquid investments below its highly
liquid investment minimum, which must include requiring the person(s)
designated to administer the program to report to the fund's board of
directors no later than its next regularly scheduled meeting with a
brief explanation of the causes of the shortfall, the extent of the
shortfall, and any actions taken in response, and if the shortfall
lasts more than 7 consecutive calendar days, must include requiring the
person(s) designated to administer the program to report to the board
within one business day thereafter with an explanation of how the fund
plans to restore its minimum within a reasonable period of time.
    (B) For purposes of determining whether a fund primarily holds
assets that are highly liquid investments, a fund must exclude from its
calculations the percentage of the fund's assets that are highly liquid
investments that it has segregated to cover all derivatives
transactions that the fund has classified as moderately liquid
investments, less liquid investments, and illiquid investments, or
pledged to satisfy margin requirements in connection with those
derivatives transactions, as determined pursuant to paragraph
(b)(1)(ii)(C) of this section.
    (iv) Illiquid investments. No fund or In-Kind ETF may acquire any
illiquid investment if, immediately after the acquisition, the fund or
In-Kind ETF would have invested more than 15% of its net assets in
illiquid investments that are assets. If a fund or In-Kind ETF holds
more than 15% of its net assets in illiquid investments that are
assets:
    (A) It must cause the person(s) designated to administer the
program to report such an occurrence to the fund's or In-Kind ETF's
board of directors within one business day of the occurrence, with an
explanation of the extent and causes of the occurrence, and how the
fund or In-Kind ETF plans to bring its illiquid investments that are
assets to or below 15% of its net assets within a reasonable period of
time; and
    (B) If the amount of the fund's or In-Kind ETF's illiquid
investments that are assets is still above 15% of its net assets 30
days from the occurrence (and at each consecutive 30 day period
thereafter), the fund or In-Kind ETF's board of directors, including a
majority of directors who are not interested persons of the fund or In-
Kind ETF, must assess whether the plan presented to it pursuant to
paragraph (b)(1)(iv)(A) continues to be in the best interest of the
fund or In-Kind ETF.
    (v) Redemptions in Kind. A fund that engages in, or reserves the
right to engage in, redemptions in kind and any In-Kind ETF must
establish policies and procedures regarding how and when it will engage
in such redemptions in kind.
    (2) Board oversight. A fund or In-Kind ETF's board of directors,
including a majority of directors who are not interested persons of the
fund or In-Kind ETF, must:
    (i) Initially approve the liquidity risk management program;
    (ii) Approve the designation of the person(s) designated to
administer the program; and
    (iii) Review, no less frequently than annually, a written report
prepared by the person(s) designated to administer the program that
addresses the operation of the program and assesses its adequacy and
effectiveness of implementation, including, if applicable, the
operation of the highly liquid investment minimum, and any material
changes to the program.
    (3) Recordkeeping. The fund or In-Kind ETF must maintain:
    (i) A written copy of the program and any associated policies and
procedures adopted pursuant to paragraphs (b)(1) through (b)(2) of this
section that are in effect, or at any time within the past five years
were in effect, in an easily accessible place;
    (ii) Copies of any materials provided to the board of directors in
connection with its approval under paragraph (b)(2)(i) of this section,
and materials provided to the board of directors under paragraph
(b)(2)(iii) of this section, for at least five years after the end of
the fiscal year in which the documents were provided, the first two
years in an easily accessible place; and
    (iii) If applicable, a written record of the policies and
procedures related to how the highly liquid investment minimum, and any
adjustments thereto, were determined, including assessment of the
factors incorporated in paragraphs (b)(1)(iii)(A) through (B) of this
section and any materials provided to the board pursuant to paragraph
(b)(1)(iii)(A)(3) of this section, for a period of not less than five
years (the first two years in an easily accessible place) following the
determination of, and each change to, the highly liquid investment
minimum.
    (c) UIT liquidity. On or before the date of initial deposit of
portfolio securities into a registered UIT, the UIT's principal
underwriter or depositor must determine that the portion of the
illiquid investments that the UIT holds or will hold at the date of
deposit that are assets is consistent with the redeemable nature of the
securities it issues, and must maintain a record of that determination
for the life of the UIT and for five years thereafter.

0
3. Section 270.30b1-10 is added to read as follows:

Sec.  270.30b1-10   Current report for open-end management investment
companies.

    Every registered open-end management investment company, or series
thereof but not a fund that is regulated as a money market fund under
Sec.  270.2a-7, that experiences any event specified on Form N-LIQUID,
must file with the Commission a current report on Form N-LIQUID within
the period specified in that form.

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
4. The general authority citation for part 274 continues to read, in
part, as follows, and the sectional authorities for Sec. Sec.  274.101
and 274.130 are removed:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and Pub. L. 111-203,
sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.
* * * * *

Sec.  274.11A   [Amended]

0
5. Amend Form N-1A (referenced in Sec.  274.11A) by:
0
a. In General Instruction A. Definitions, revising the definition of
Exchange-Trade Fund;
0
b. In Item 11 removing paragraph (c)(3) and redesignating paragraphs
(c)(4), (c)(5), (c)(6) and (c)(7) as paragraphs (c)(3), (c)(4), (c)(5)
and (c)(6), respectively; and
0
c. In Item 11 adding new paragraph (c)(7) and paragraph (c)(8);
    The revisions and additions read as follows:

    Note: The text of Form N-1A does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-1A
* * * * *
General Instructions
A. Definitions * * *
    ``Exchange-Traded Fund'' means a Fund or Class, the shares of which
are listed and traded on a national securities exchange, and that has
formed and operates under an exemptive order granted by the Commission
or in reliance on an exemptive rule adopted by the Commission.
* * * * *

Item 11. Shareholder Information
    (a) * * *
    (c) * * *
    (7) The number of days following receipt of shareholder redemption
requests in which the fund typically expects to pay out redemption
proceeds to redeeming shareholders. If the number of days differs by
method of payment (e.g., check, wire, automated clearing house), then
disclose the typical number of days or estimated range of days that the
fund expects it will take to pay out redemptions proceeds for each
method used.
    (8) The methods that the fund typically expects to use to meet
redemption requests, and whether those methods are used regularly, or
only in stressed market conditions (e.g., sales of portfolio assets,
holdings of cash or cash equivalents, lines of credit, interfund
lending, and/or ability to redeem in kind).
* * * * *

Sec.  274.101   [Amended]

0
6. Effective June 1, 2018, amend Form N-CEN [(referenced in Sec.
274.101), as published elsewhere in this issue by:
0
a. In Part C, adding Item C.20; and
0
b. In Part E, adding Item E.5.
    The additions read as follows:

Form N-Cen

Annual Report for Registered Investment Companies

* * * * *

Part C. Additional Questions for Management Investment Companies

    * * *
Item C.20. Lines of credit, interfund lending, and interfund borrowing.
For open-end management investment companies, respond to the following:
    a. Does the Fund have available a line of credit? [Yes/No] If yes,
for each line of credit, provide the information requested below:
    i. Is the line of credit a committed or uncommitted line of credit?
[committed/uncommitted]
    ii. What size is the line of credit? [insert dollar amount]
    iii. With which institution(s) is the line of credit? [list
name(s)]
    iv. Is the line of credit just for the Fund, or is it shared among
multiple funds? [sole/shared]
    1. If shared, list the names of other funds that may use the line
of credit. [list names and SEC File numbers]
    v. Did the Fund draw on the line of credit this period? [Yes/No]
    vi. If the Fund drew on the line of credit during this period, what
was the average amount outstanding when the line of credit was in use?
[insert dollar amount]
    vii. If the Fund drew on the line of credit during this period,
what was the number of days that the line of credit was in use? [insert
amount]
    b. Did the Fund engage in interfund lending? [Yes/No] If yes, for
each loan provide the information requested below:
    i. What was the average amount of the interfund loan when the loan
was outstanding? [insert dollar amount.]
    ii. What was the number of days that the interfund loan was
outstanding? [insert amount]
    c. Did the Fund engage in interfund borrowing? [Yes/No] If yes, for
each loan provide the information requested below:
    i. What was the average amount of the interfund loan when the loan
was outstanding? [insert dollar amount.]
    ii. What was the number of days that the interfund loan was
outstanding? [insert amount]
* * * * *

Part E. Additional Questions for Exchange-Traded Funds and Exchange-
Traded Managed Funds

* * * * *
Item E.5
* * * * *
    In-Kind ETF. Is the Fund an ``In-Kind Exchange-Traded Fund'' as
defined in rule 22e-4 under the Act? [Y/N]
* * * * *

Sec.  274.150   [Amended]

0
7. Amend Form N-PORT (referenced in Sec.  274.150), as published
elsewhere in this issue by:
0
a. In the General Instructions E. Definitions, adding definitions of
``Highly Liquid Investment Minimum'' and ``Illiquid Investment'' in
alphabetical order;
0
b. In the General Instructions, revising the second paragraph of F.
Public Availability;
0
c. In Part B, adding Item B.7 and Item B.8; and
0
d. In Part C, adding Item C.7.
    The revisions and additions read as follows:

Form N-Port

Monthly Portfolio Investments Report

* * * * *

E. Definitions

* * * * *
    ``Highly Liquid Investment Minimum'' has the meaning defined in
rule 22e-4(a)(7).
    ``Illiquid Investment'' has the meaning defined in rule 22e-
4(a)(8).
* * * * *

F. Public Availability

* * * * *
    The SEC does not intend to make public the information reported on
Form N-PORT for the first and second months of each Fund's fiscal
quarter that is identifiable to any particular Fund or adviser, or any
information reported with regards to a Fund's Highly Liquid Investment
Minimum (Item B.7 of this Form), country of risk and economic exposure
(Item C.5.b), delta (Items C.9.f.5, C.11.c.vii, or C.11.g.iv),
liquidity classification for portfolio investments (Item C.7), or
miscellaneous securities (Part D of this Form), or explanatory notes
related to any of those topics (Part E) that is identifiable to any
particular Fund or adviser. However, the SEC may use information
reported on this Form in its regulatory programs, including
examinations, investigations, and enforcement actions.
* * * * *

Part B. Information About the Fund

* * * * *
Item B.7 Highly Liquid Investment Minimum Information.
    a. If applicable, provide the Fund's current Highly Liquid
Investment Minimum.
    b. If applicable, provide the number of days that the Fund's
holdings in Highly Liquid Investments fell below the Fund's Highly
Liquid Investment Minimum during the reporting period.
    c. Did the Fund's Highly Liquid Investment Minimum change during
the reporting period? [Y/N]
    1. If yes, provide any Highly Liquid Investment Minimums set by the
fund during the reporting period.
Item B.8 Liquidity aggregate classification information. For portfolio
investments of open-end management investment companies, provide the
following information:

    a. The aggregate percentage of investments that are assets
(excluding any investments that are reflected as liabilities on the
Fund's balance sheet) compared to total investments that are assets of
the Fund for each of the following categories as specified in rule 22e-
4:

    1. Highly Liquid Investments
    2. Moderately Liquid Investments
    3. Less Liquid Investments
    4. Illiquid Investments
    b. Derivatives Transactions. The percentage of the Fund's highly

liquid investments that it has segregated to cover or pledged to
satisfy margin requirements in connection with derivatives transactions
that are classified as:
    1. Moderately Liquid Investments
    2. Less Liquid Investments
    3. Illiquid Investments
* * * * *

Part C. Schedule of Portfolio Investments

* * * * *
Item C.7. Liquidity classification information. For portfolio
investments of open-end management investment companies, provide the
liquidity classification for each portfolio investment among the
following categories as specified in rule 22e-4:
    1. Highly Liquid Investments
    2. Moderately Liquid Investments
    3. Less Liquid Investments
    4. Illiquid Investments
* * * * *

0
8. Section 274.223 is added to subpart C to read as follows:

Sec.  274.223   Form N-LIQUID, Current report, open-end investment
company liquidity.

    This form shall be used by registered open-end management
investment companies, or series thereof, but not including a company or
series thereof that is regulated as a money market fund under Sec.
270.2a-7 of this chapter, to file reports pursuant to Sec.  270.30b1-10
of this chapter.

    Note: The text of Form N-LIQUID will not appear in the Code of
Federal Regulations.

United States Securities and Exchange Commission

Washington, DC 20549

Form N-LIQUID

Current Report

Open-End Management Investment Company Liquidity

    Form N-LIQUID is to be used by a registered open-end management
investment company, or series thereof (``fund''), under the Investment
Company Act of 1940 [15 U.S.C. 80a] (``Act'') but not including a fund
that is regulated as a money market fund under rule 2a-7 under the Act
(17 CFR 270.2A-7), to file current reports with the Commission pursuant
to [rule 30b1-10] under the Act [(17 CFR 270.30b1-10)]. The Commission
may use the information provided on Form N-LIQUID in its regulatory,
disclosure review, inspection, and policymaking roles.

General Instructions

A. Rules as to Use of Form N-LIQUID

    (1) Form N-LIQUID is the reporting form that is to be used for
current reports of open-end management investment companies
(``registrants'') required by section 30(b) of the Act and rule 30b1-10
under the Act. The Commission does not intend to make public
information reported on Form N-LIQUID that is identifiable to any
particular registrant, although the Commission may use Form N-LIQUID
information in an enforcement action.
    (2) Unless otherwise specified, a report on this Form N-LIQUID is
required to be filed, as applicable, within one business day of the
occurrence of the event specified in Parts B-D of this form. If the
event occurs on a Saturday, Sunday, or holiday on which the Commission
is not open for business, then the one business day period shall begin
to run on, and include, the first business day thereafter.

B. Application of General Rules and Regulations

    The General Rules and Regulations under the Act contain certain
general requirements that are applicable to reporting on any form under
the Act. These general requirements should be carefully read and
observed in the preparation and filing of reports on this form, except
that any provision in the form or in these instructions shall be
controlling.

C. Information To Be Included in Report Filed on Form N-LIQUID

    Upon the occurrence of the event specified in Parts B-D of Form N-
LIQUID, a registrant must file a report on Form N-LIQUID that includes
information in response to each of the items in Part A of the form, as
well as each of the items in the applicable Parts B-D of the Form.

D. Filing of Form N-LIQUID

    A fund must file Form N-LIQUID in accordance with rule 232.13 of
Regulation S-T (17 CFR part 232). Form N-LIQUID must be filed
electronically using the Commission's Electronic Data Gathering,
Analysis and Retrieval System (``EDGAR'').

E. Paperwork Reduction Act Information

    A registrant is not required to respond to the collection of
information contained in Form N-LIQUID unless the form displays a
currently valid Office of Management and Budget (``OMB'') control
number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing
the burden to the Secretary, Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090. The OMB has reviewed this
collection of information under the clearance requirements of 44 U.S.C.
3507.

F. Definitions

    References to sections and rules in this Form N-LIQUID are to the
Investment Company Act (15 U.S.C. 80a), unless otherwise indicated.
Terms used in this Form N-LIQUID have the same meaning as in the
Investment Company Act or rule 22e-4 under the Investment Company Act,
unless otherwise indicated. In addition, as used in this Form N-LIQUID,
the term registrant means the registrant or a separate series of the
registrant.

United States Securities and Exchange Commission

Washington, DC 20549

Form N-LIQUID

Current Report

Open-End Management Investment Company Liquidity

Part A. General Information

Item A.1. Report for [mm/dd/yyyy].
Item A.2. CIK Number of registrant.
Item A.3. EDGAR Series Identifier.
Item A.4. Securities Act File Number.
Item A.5. Provide the name, email address, and telephone number of the
person authorized to receive information and respond to questions about
this Form N-LIQUID.

Part B. Above 15% Illiquid Investments

    If more than 15 percent of the registrant's net assets are, or
become, illiquid investments that are assets as defined in rule 22e-4,
then report the following information:

Item B.1. Date(s) on which the registrant's illiquid investments that
are assets exceeded 15 percent of its net assets.
Item B.2. The current percentage of the registrant's net assets that
are illiquid investments that are assets.
Item B.3. Identification of Illiquid investments. For each investment
that is an asset that is held by the registrant that is considered
illiquid, disclose (1) the name of the issuer, the title of the issue
or description of the investment, the CUSIP (if any), and at least one
other identifier, if available (e.g., ISIN, Ticker, or other unique
identifier (if ticker and ISIN are not

available)) (indicate the type of identifier used), and (2) the
percentage of the fund's net assets attributable to that investment.

Part C. At or Below 15% Illiquid Investments

    If a registrant that has filed part B of Form N-LIQUID determines
that its holdings in illiquid investments that are assets have changed
to be less than or equal to 15 percent of the registrant's net assets,
then report the following information:

Item C.1. Date(s) on which the registrant's illiquid investments that
are assets fell to or below 15 percent of net assets.
Item C.2. The current percentage of the registrant's net assets that
are illiquid investments that are assets.

Part D. Assets That Are Highly Liquid Investments Below the Highly
Liquid Investment Minimum

    If a registrant's holdings in assets that are highly liquid
investments fall below its highly liquid investment minimum for more
than 7 consecutive calendar days, then report the following
information:

Item D.1. Date(s) on which the registrant's holdings of assets that are
highly liquid investments fell below the fund's highly liquid
investment minimum.

Signatures

    Pursuant to the requirements of the Investment Company Act of 1940,
the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
-----------------------------------------------------------------------

(Registrant)

Date-------------------------------------------------------------------
-----------------------------------------------------------------------

(Signature)*

    * Print name and title of the signing officer under his/her
signature.

    By the Commission.

    Dated: October 13, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-25348 Filed 11-17-16; 8:45 am]
 BILLING CODE 8011-01-P