Sep. 30, 2020
Subject: File No. S7-08-20 From: Sumit Gupta -------------------------- September 30, 2020 I am opposed to the proposed change, and instead favor of keeping the current $100M rule for 13F reporting. As an individual investor managing and investing money for my family, I'm in favor of more transparency rather than less. I think the argument that people copy cat fund positions from 13F is unfair. Most fundamentally based managers have plenty of time to establish a position before it gets reported in a 13F. Most of these managers are not buying and selling within months, but instead they would like to hold for years ideally. In fact more eyeballs on these stocks instead helps these stocks get more interest which eventually translates into more flows into these stocks and thus better price discovery. All of this is especially true for micro, nano, smaller and mid cap companies. If certain funds are trading in and out on a less than quarterly time-frame, then their 13Fs are useless to the long term investor and the argument about copycatting is invalid. Passive investing flows into market cap weighted ETFs, also flows into the SPX and NDX from 401ks have started to distort the market where everyone needs to own the same large cap stocks and FAANG stocks. Its just a big crowded trade, and if you happen to be a popular large cap then you keep getting bought by these flows. By giving access to 13F for smaller funds which actually do real fundamental research and even activism, it allows for more efficient price discovery for micro/smaller/mid cap public companies. Fund managers and individual investors can see what their favorite fund managers are buying which allows for greater price discovery. It also helps the individual investor direct their energies and time to research certain stocks even further. It helps the fund manager if the broader market also participates and starts buying these stocks. That is why so many fund managers are pitching stocks at investment conferences or in their quarterly fund letters. Another benefit is skin-in-the-game and alignment. Many fund managers are releasing quarterly letters talking about and pitching their investment thesis on different stocks. Same thing for many public platforms like Twitter Seeking Alpha, Stocktwits and plenty of stock forums where fund managers discuss investment ideas frequently. I would like to confirm by checking a 13F whether or not what they discussing is real or not. For an individual investor checking 13Fs is the only way for me to verify what managers are saying is in their portfolio. In the end I think the proposed rule will have the opposite consequence of what is actually intended and might make smaller fund managers struggle even more as no one even buys the same stocks as them. So please keep 13F disclosure as it is at $100M. If the idea is to create less compliance burden/cost for fund managers then I think a better way is to modernize the SEC website so the online forms could be easily filled/saved instead. The focus should be on improving the digital/IT infrastructure to make it easier for fund managers rather than increasing the AUM threshold. Please aspire towards more transparency in markets rather the less.