July 26, 2020
This proposal would change the AUM threshold that investment managers must meet every quarter from $100 million to $3.5 billion To put it in perspective, for the most recent quarter, that would reduce the number of funds that disclosed their holdings to the public from 5,283 to 549 or almost 90% of all filers. $2.3 trillion in investment holdings would no longer be disclosed to the public resulting in loss of transparency and valuable insight. When Congress first adopted Section 13(f) it did so to stimulate a higher degree of confidence among all investors in the integrity of the US securities markets. Taking this data away will have the opposite effect. Transparency is what gives investors confidence in US markets.
Given the SEC's emphasis on a level fair playing field, this rule change makes no sense. The reasoning behind the proposed change is the possible reduction in costs and burdens to smaller managers. This justification is nonsense. I have asked several managers that file and they say it is a highly automated process that effectively costs nothing. The claimed cost savings are completely inaccurate.
One SEC commissioner, Allison Heren Lee, has already voiced her opposition to this proposal. https://www.sec.gov/news/public-statement/lee-13f-reporting-2020-07-10
The proposed rule change would be a loss for the main street investor. The SEC should be pushing for more disclosure and transparency and not rolling back existing rules. This can only hurt small investors and provides little to no benefit or savings.
Here is a list of issues of how this personally affects me and many other small investors
Raising the reporting threshold to such a high number will severely limit future academic research on markets, investing and securities.
Raising the reporting threshold to such a high number will reduce public companies' opportunity to know more about who their shareholders are.
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 fair playing field, this rule change makes no sense.
The justification for the rule change is highly questionable.
When is less transparency and less data ever a good thing for the small investor?
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.
In the event of a significant correction the number of reporting managers would be diminished even further. The SP 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.
To finalize, this would be a terrible move for the small invetor who is highly dependent on this information which creates the transparency in the US stock market and consequently trust in the same system. This change would negatively affect said trust and the reputation of the US stock exchange.