Proposed 13F Rule Change Reduces Transparency, May Lack Authority
With the proposed rule, Reporting Threshold for Institutional Investment Managers, the Securities and Exchange Commission (SEC) is seeking to raise the asset threshold for investment managers to report their holdings under Rule 13F from $100 million to $3.5 billion.
This change would exempt nearly 90 percent of current filers, totaling more than 4,500 institutional investment managers with $2.322 trillion in reported assets. (The SEC notes that nearly 91 percent of the dollar value of the reported assets would continue to be reported.)
CFA Institute voiced its opposition in a comment letter submitted to the Commission on 29 September from James C. Allen, CFA head, Capital Markets Policy; and Stephen Deane, CFA, senior director, Capital Markets Policy.
In our comment letter to the SEC, we argued that such a drastic change would reduce transparency and investor confidence. Investors use 13F holdings disclosures for a variety of purposes, from tracking crowded trades to performing due diligence on smaller investment managers. Public companies use the data to identify an important segment of their shareholder base and to engage in shareholder dialogue. Academics use the data for research that helps to inform markets and regulators.
Authority in Question
We also questioned the SEC’s authority to raise the reporting threshold, because the enabling statute appears to give the SEC authority only to lower it. We also noted the contrast from the SEC’s recent approach used in a separate rule, which made no change to the financial thresholds in the accredited investor definition, designed to protect individual investors. In our view, those are the thresholds in need of updating given that they have been eroded by nearly four decades of inflation.
Opposition to this change from CFA Institute and other respected financial organizations received wide media pickup, including in Bloomberg Law among others.