August 4, 2015
I am writing to urge the Securities and Exchange Commission to help academic researchers to do their job--and, thus, to help the SEC in its mission. There are numerous academic researchers whose primary goal is to conduct impartial and high-quality research to be disseminated to the public, thus, they represent a large public good that may be exploited for the benefit of taxpayers. My suggestions would also help the investing public to gather information on their funds and their management companies.
Specifically, many academic researchers work on SEC data, and this often involves mapping together data from different SEC forms.
In the Investment Company Reporting Modernization and in the Amendments to Form ADV and Investment Advisers Act Rules, there is a great opportunity to assist academic researchers and investors in this regard.
(I will repeat this comment in both requests for comments of the above two proposed rules--since the requests are interrelated.)
Here is how the identification of entites could be greatly improved:
1. For every filing by a mutual fund, require an exhaustive list of the tickers and CUSIPS associated with that mutual fund (at the date of the filing).
2. For mutual fund filings that contain portfolio holdings, each security should have (when available) both the ticker and CUSIP listed (or, if foreign security, ISIN and Sedol). Also, list the primary exchange/market where the security is traded at the date of the filing.
3. Form ADV should list all mutual funds that are advised, or subadvised by the advisor--using the CIK/SeriesID/ClassID identifiers. The exact relationship between the advisor and the fund should be specified (for example, the "primary advisor," a "secondary advisor," or a "subadvisor"). In the case of a "secondary advisor" or "subadvisor", the nature of the services provided should be listed (e.g., asset allocation modeling). In addition, the gross and net assets under management for each fund should be listed at the date of the filing. This is necessary for investors and academics to better understand the industrial organization of the mutual fund industry, which could help to bring an understanding, among other things, to potential conflicts-of-interest.
4. Form ADV should list all hedge funds, private equity funds, and liquidity funds that are advised or subadvised by the advisor--using the CIK/SeriesID/ClassID identifiers. The exact relationship between the advisor and the fund should be specified (for example, the "primary advisor," a "secondary advisor," or a "subadvisor"). In the case of a "secondary advisor" or "subadvisor", the nature of the services provided should be listed (e.g., asset allocation modeling). In addition, the gross and net assets under management for each fund should be listed at the date of the filing.
These simple steps would go a long ways toward easing the path to a lot of productive research in the future, and to increasing transparency for investors.
Thank you very much,
Russ Wermers
Professor of Finance
University of Maryland