Subject: S7-08-20: WebForm Comments from Gupta, Sumit
From: Sumit Gupta
Affiliation:

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.