July 14, 2020
Wall street and money managers are known to talk among themselves, thus very little transparency for main street investors as it stands now. These insiders often share ideas and information the public is not privy too. Sometimes we call this insider information or sharing non public information. Very tough to prove, but this legislation would take even more transparency away from main street investors and the SEC alike. The legislation is going the wrong way
These hedge fund or Investment managers have access at their fingertips to any companies management that small investors have never had, due to resources.
Given the SEC's emphasis on a level fair playing field and more transparency by main street investors, this rule change makes no sense and has zero justification.
The 13G/D filings are automated by legal software bought off the shelf, so the expense to any sizable fund above $50m is negligible. Do not be fooled by the cost to file logic.
These investment managers are taking on average a $2m-$25m or 5% stake in a company, but want you to think that the $150 is going to break their bankroll.
If this legislation passed the SEC is literally not protecting investors, in fact the exact opposite. Currently these large high conviction purchases (over 5%) can seriously impact a public companies with low float or low volume trading, literally a large stakeholder can manipulate a stock and small investors and main street investors need to understand what is happening inside companies and who the stakeholders are to truly have a sense of what the company's future might look like.
I believe the SEC ought to go the other way and make anyone taking a 5%+ position in a company must make a 13G/D SEC filing now matter the AUM of their fund and it should be done the day of the event/trade not 10 days afterwards as by then, in my experience approx 70% of these low float/ low volume stocks have pumped within 1-7 days of the high conviction position being taken and this is because of the information flow and you can't tell me much of this information flow isn't insider trading
Some investors may want to avoid over-owned stocks, believing they have a high level of risk. This rule change greatly reduces individual investors ability to reduce their risk.
This legislation wreaks of Wall street insiders writing the rules when all filings are automated through software.
Government, SEC, FINRA etc all talk about helping close the inclusion and inequality gaps in America. This rule is the opposite of both of those goals and could be seen as racist legislation.
There is a saying in investing and that is "when in doubt widen out" to get the full picture or essentially more transparency of the macro of the stock before you make an investment decision. This legislation only focuses on helping wall street, when will the SEC actually help main street investors?
Marc