July 15, 2020
Dear SEC,
The proposed 13f reporting threshold rule change would greatly diminish transparency, especially for Main Street investors. By your own analysis, the number of current filers to be relieved would be 89.2%, more than 4,500 institutional investment managers would no longer report holdings. This would dramatically reduce transparency about discretionary accounts. Many Main Street investors would be at a disadvantage.
If anything, the SEC should consider LOWERING the asset under management requirement to increase transparency of funds under $100 million. These funds have a fiduciary responsibility to their clients and investors. The current 13f filing requirement is one way Main Street investors can use the system as a check and balance against investment managers. 13fs are used to make sure the investment manager is abiding by their investment mandate and not taking advantage of limited partners. By allowing Main Street to see what their investment manager is buying and selling increases transparency and allows critical data to be shared.
The SECs projected savings are so insufficient this part of the argument should be excluded. Most 13f filing requirements today are highly automated and dont cost investment managers much at all. Even assuming your analysis is correct, at the midpoint cost of roughly $20,000 on assets of $100,000,000, would equate to .02% cost. Other costs should be considered well before using 13f savings as a reason to increase AUM filing requirements. Regardless, the loss in transparency is much more detrimental.
Regarding this topic, I think Commissioner Allison Herren Lee said it best:
The release states a belief that the proposal will likely enhance competition by lowering the cost to participate in the market and benefit investors if such savings are passed through to investors. I support identifying ways to help smaller managers compete effectively, and to target their resources in ways that benefit investors. But, it is difficult to credit the possibility that the relatively small savings for this particular population of managers could advance either goal in any meaningful way.
I, under no circumstances, support this proposed rule change. The cost savings are minimal (at best) and do not outweigh the large loss in transparency.