SEC proposes significant increase to reporting threshold on Form 13F for institutional investment managers

21 July 2020 | Applicable law: US

On July 10, 2020, the Securities and Exchange Commission (“SEC”) announced its proposal to amend Form 13F to update the reporting threshold for institutional investment managers and make other targeted changes. More specifically, the SEC proposed increasing the current reporting threshold of $100 million to $3.5 billion. According to the SEC’s release, this is the first change to the threshold amount for Form 13F in over 40 years, and it is designed to reflect proportionally the same market value of U.S. equities that $100 million represented in 1975.

In general, Rule 13F-1 under the Securities Exchange Act of 1934 requires an institutional investment manager that uses the U.S. mail (or other means or instrumentality of interstate commerce) in the course of its business, and that exercises investment discretion over $100 million or more in “Section 13(f) securities,” must report its holdings quarterly on Form 13F with the SEC. An institutional investment manager is defined as (1) an entity that invests in, or buys and sells, securities for its own account; or (2) a natural person or an entity that exercises investment discretion over the account of any other natural person or entity. Institutional investment managers can include investment advisers, broker-dealers, pension funds, banks, insurance companies, corporations, and family offices. In addition, foreign institutional investment managers are required to file a Form 13F if they meeting the foregoing requirements. Section 13(f) securities generally include equity securities that trade on an exchange, certain equity options and warrants, shares of closed-end investment companies, and certain convertible debt securities.

The SEC stated that its primary impetus for the change is to provide relief to smaller managers who are now subject to the burdens of Form 13F reporting, “while retaining data on over 90% of the dollar value of the securities currently reported.” The SEC added that the proposed new reporting requirement is designed to reflect proportionally the same market value of U.S. equities that $100 million represented in 1975.

In its release, the SEC did acknowledge that raising the Form 13F reporting threshold would decrease holdings data available to the SEC and other regulators as well as corporate issuers, market participants, and other analysts and researchers pursuant to Section 13(f). Indeed, Commissioner Allison Lee, in a separate release, claimed that the proposal “joins a long list of recent actions that decrease transparency and reduce both the Commission’s and the public’s access to information about our markets.” The SEC, however, defended the new $3.5 billion reporting threshold based on its belief that the investing public would be less concerned about the availability of portfolio holdings of smaller managers who are not likely to cause market effects of the type contemplated by Section 13(f).

The SEC also proposed a few additional changes to Form 13F reporting, including the elimination of a reporting exception that allowed managers to omit certain small positions, specifically holdings of fewer than 10,000 shares and less than $200,000 aggregate fair market value, thereby increasing the overall holdings required from larger managers. Other SEC proposals include requiring the staff to review the Form 13F reporting threshold every five years and amending the instructions relating to requests for confidential treatment of Form 13F information.

The SEC proposal will be published on its website and in the Federal Register. There will be a 60-day comment period following publication in the Federal Register.

If you have any questions about the proposed changes to Form 13F and their possible impact, please contact your regular Withers attorney or any of the attorneys listed on this page.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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