July 21, 2020
In my view, the 13F reporting threshold proposed by this potential rule change is far too high. Instead, I suggest increasing the 13F reporting threshold to $1B or less.
Points to consider:
- Raising the reporting threshold to such a high number would severely limit future academic research on markets, investing and securities.
- Raising the reporting threshold to such a high number would reduce public companies' opportunity to know more about who their shareholders are. Of note, this would be especially true for smaller market capitalization companies.
- Many managers are known to talk among themselves, sharing ideas and information. They have access to company management that small investors don't. Given the SEC's emphasis on a level and fair playing field, this rule change makes little sense.
- In general, reducing transparency and access to data disadvantages smaller investors.
- Some investors may want to avoid over-owned stocks, believing they have a high level of risk. This rule change would greatly reduce individual investors' ability to reduce this type of risk.
- In the event of a significant correction the number of reporting managers would be diminished even further. The SP 500 suffered a 56.4% decline during the 2007-2009 financial crisis. A similar event using the most recent quarter as an example, would have reduced the number of funds by another 31% at a time when such data is needed even more.