The SEC proposed amendments to Form 13F to (i) raise the reporting threshold for institutional investment managers from $100 million to $3.5 billion, (ii) modernize its data reporting framework and (iii) update the instructions for confidential treatment requests.

In the rule proposal, the SEC explained that the increase in Form 13F filers and the growth of the publicly traded equities market over the past 45 years warrant the proposed threshold adjustment. In anticipation of the increased threshold, the SEC is also aiming to remove the omission threshold for Form 13F, which allows managers to exclude small positions (holdings of fewer than 10,000 shares or a $200,000 principal amount of convertible debt securities) from their Form 13F report so as to decrease their reporting burden. The SEC reasoned that the significant increase in the threshold decreases the reporting burden to managers of large holdings, rendering the omission threshold unnecessary. Additionally, the The proposal would require institutional investment managers filing Form 13F to provide additional identifying information, including:

  • a Central Registration Depository number, if one is assigned to them by FINRA or the Investment Adviser Registration Depository; and
  • an SEC filing number, if one is assigned to them.

The SEC also included technical amendments within the proposal to align (i) the information provided in Form 13F with its existing eXtensible Markup Language (XML) composition and (ii) confidential treatment requests for Form 13F with the standards set in Food Marketing Institute v. Argus Leader Media, 139 S.Ct. 2356 (2019).

Comments on the proposal must be submitted within 60 days after publication in the Federal Register.

Commissioner Statement

Commissioner Allison Herren Lee disapproved of the proposal to eliminate
"visibility into portfolios controlling $2.3 trillion in assets" as an implication of the drastic threshold increase. According to Ms. Lee, such amendments would reduce both the SEC and the public's ability to access market information. Ms. Lee also raised the concern that Congress only provided the SEC with the authority to lower the reporting threshold, not raise it.

Commentary

This proposal is a meaningful step by the SEC to reduce reporting burdens on small firms and, by extension, to reduce the burden on the SEC of collecting information that is not very useful to it. See also SEC Expands Small Broker-Dealer Exemption from Risk Assessment Reporting. Hopefully, more of the same follows for the SEC and other regulators. The required collection and reporting of useless information is a drag on the economy and a particular burden on smaller firms that have less scale to absorb regulatory costs.

Primary Sources

  1. SEC Press Release: SEC Proposes Amendments to Update Form 13F for Institutional Investment Managers; Amend Reporting Threshold to Reflect Today's Equities Markets
  2. SEC Proposed Rule: Reporting Threshold for Institutional Investment Managers
  3. SEC Statement, Allison Herren Lee: Statement on the Proposal to Substantially Reduce 13F Reporting

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