Subject: File No. S7-08-20
From: Chad W Gassaway, CMT

July 28, 2020

Proposed rule number S7-08-20 would result in asset managers increasing the reporting thresholds for Form 13F filing from $100 million to $3.5 billion.

Regulatory burdens placed on moderate sized funds are already enormous. While filing fees are low, costs related to time and effort to prepare yet another filing increases reporting costs and decreases returns to the fund and its investors. As stated by the SEC, $68.1 to $136 million in direct costs will be saved by the industry and in turn investors.

While some will claim that industry transparency will be reduced, in no other industry are companies required to divulge their proprietary strategies. At what point in time has a standard bank been required to turn over specifics on all of their loan holdings? When has a tech company been required to release details on their RD division? Moreover, commodity, futures, and bond positions are not required to be included and those funds are given a proprietary advantage as well, yet are in the same industry.

While many retail traders follow select managers through their 13F holdings, the delay in making the information public often results in chasing returns. The portfolio may no longer hold the underlying security, investment time horizons may differ (e.g., swing or buy and hold), and risk tolerance is not included, and may in fact can be detrimental to non-accredited investors who only blindly follow trades that are inappropriate for their goals and risk appetite. For example, if long SP puts, it is not known if this is a hedging strategy or if the company is bearish the market and can mislead retail investors. Additionally, an unsophisticated investor may view the 13F for a company such as quantitative and HFT shop Jump Trading. While returns may be outstanding, in no way can they emulate these returns with their lack of technology. Finally, as short positions are not included, portfolio construction can be vastly skewed from reality. Is this an outright long or a pair trade? Only an insider would know.

Any investor owning more than 5% of outstanding shares of a publicly held must continue to file a 13D or 13G. As a result, those with significant influence will continue to be known by both the fund and other investors. If needed, ownership may be requested through the transfer agent as well.

The SEC has and will continue to have the right to regulate and oversee securities markets and its participants, however, fund managers costs will decrease, proprietary strategies will be protected, and retail investors will not be fed outdated data. Despite the negative headlines, the proposed rule would be industry beneficial and those benefits may result in retail traders taking ownership of their own portfolios.