Proposed Amendment to 13F – What This Really Means?
The SEC released a proposed amendment to Form 13F on July 10 to update the reporting threshold for institutional investment managers and make other targeted changes. The threshold has not been adjusted since the Commission adopted Form 13F over 40 years ago.
New Proposed Reporting Threshold:
The proposal would raise the reporting threshold to $3.5 billion from the current $100M threshold – which would reflect proportionally the same market value of U.S. equities that $100 million represented in 1975, when 13F was first adopted. The new threshold would retain disclosure of over 90% of the dollar value of the holdings data currently reported while eliminating the Form 13F filing requirement and its attendant costs for the nearly 90% of filers that are smaller managers. In addition, since the initial 13F thresholds were established in 1978, the Commission has added other data collection tools, including N-PORT.
Other Proposed Changes:
- SEC would review threshold every five years and make recommendations, if any, to the Commission.
- Eliminate option to not report “de minimis” positions. (i.e. both less than 10k shares and less than $200k value). All positions would be required to be listed.
- Managers would also be required to report additional numerical identifiers to enhance the usability of the information provided on the form; and
- amend the instructions relating to requests for confidential treatment of Form 13F information.
Substantial Reduction in Visibility – Disagreement among SEC Commissioners:
SEC Commissioner Allison Herren Lee issued a public statement voicing opposition when the proposed changes were announced. In her statement, Commissioner Lee noted that the change in reporting threshold would substantially reduce visibility into portfolios controlling $2.3 trillion in assets and eliminate access to information about discretionary accounts managed by more than 4,500 institutional investment managers.
Among the critiques, Commissioner Lee disputed the SEC’s ability to raise the threshold at all as a matter of law (a plain reading of the Rule enacted by Congress specifically permits the SEC to lower the threshold, but does not grant similar authority to raise it. see section 13(f)(1).)
The proposal will be published in the Federal Register, followed by a 60-day comment period. Possible to see a Final Rule before year-end, but not certain.
We expect to see a lower threshold than the proposed $3.5B, when a final Rule is adopted. Under the current proposal, 90% of filers (i.e. more than 4,500 institutional investment managers) would no longer be subject to reporting.
CSS will be monitoring public commentary as its posted during the 60-day comment period and will continue to update on likelihood of passage as this plays out. For more information or to speak with our regulatory experts, email us at: firstname.lastname@example.org