Locke Lord QuickStudy: SEC Proposes Increased Threshold for Form 13F Reporting

FUNDamentals™ Series
Locke Lord LLP
July 13, 2020

On July 10, 2020, the Securities and Exchange Commission (the “SEC”) proposed raising the Form 13F reporting threshold for institutional investment managers from $100 million to $3.5 billion. This threshold has not been adjusted in over 40 years.

Exchange Act Section 13(f) and Rule 13f-1 require managers to file quarterly reports with the SEC on Form 13F, which is designed to provide the SEC with data from larger investment managers about their investment activities and holdings so that their influence and impact on the market can be considered in maintaining fair and orderly securities markets. Currently, managers must file a Form 13F if they exercise investment discretion over accounts having an aggregate fair market value of more than $100 million attributable to certain equity securities.

In its proposal, the SEC indicated that increasing the threshold to $3.5 billion would reflect proportionally the same market value of U.S. equities that $100 million represented when the statutory directive for Form 13F was adopted in 1975. This increased threshold will provide the SEC data on over 90 percent of the dollar value of the securities currently reported while allowing smaller investment managers to avoid the compliance cost associated with preparing and filing the Form 13F.  

Recognizing that market conditions will continue to evolve, the proposal also (i) directs the SEC staff to review the Form 13F reporting threshold every five years and recommend any appropriate adjustments, (ii) eliminates the ability of managers to omit certain small positions, thereby increasing the overall holdings information required from larger managers, (iii) requires managers to report additional numerical identifiers to enhance the usability of the information provided on the form, and (iv) amends the instructions relating to requests for confidential treatment of Form 13F information.

The full text of the proposal can be found here and will also be published in the Federal Register. There will be a 60-day comment period following publication in the Federal Register. The proposal includes specific requests for comment on the proposed threshold, including whether an alternative method to adjust the threshold should be considered and surrounding the estimates of the burdens and costs to investment managers, particularly smaller managers, in preparing and filing Form 13F.

As we have in the past, we will continue to monitor these issues and will provide future client updates. This QuickStudy is for guidance only and is not intended to be a substitute for specific legal advice. If you would like more information on the matters discussed here, please contact the authors.