July 30, 2020
Amid the chaos we are experiencing these days, the Securities and Exchange Commission (SEC) has proposed a rule that will certainly be harmful to investors.
The new rule involves 13F data.
Currently, any institutional money manager with more than $100 million in assets under management must file a 13F document detailing their holdings.
These 13F filings are how we know what stocks investors like Warren Buffett, Carl Icahn, Bill Ackman and many others bought, sold or held in any quarter.
Its useful information for individual investors.
The new rule proposes that the $100 million threshold be raised to $3.5 billion.
Buffett, Icahn and Ackman would still be required to file, as they are giants in the industry. But 90% of other institutions would not.
In the first quarter of 2020, 5,293 institutions filed 13Fs. Under the new proposal, that number would have dropped to 549.
Its not just a matter of seeing which individual star money managers bought and sold stock. Knowing if institutions are collectively buying or selling certain stocks is important information – and its useful for companies to know who their shareholders are as well.
The strange thing is that the SEC claims it wants to increase transparency in the market, yet this rule will do exactly the opposite
It will hide the transactions and holdings of all but the very largest institutions, keeping average investors in the dark about what the smart money is buying and selling.
Daniel Collins of WhaleWisdom says
Many managers are known to talk among themselves, sharing ideas and information. They have access to company management that small investors dont.
Given the SECs emphasis on a level fair playing field, this rule change makes no sense.
One SEC commissioner has come out against the proposal. Allison Herren Lee stated, This proposal joins a long list of recent actions that decrease transparency and reduce both the Commissions and the publics access to information about our markets.
Even Goldman Sachs thinks its a bad proposal. More information is better than less, it said.
I use 13F information all the time when analyzing companies. I research who is buying and selling what Im interested in. There are several money managers who I track. If they are starting a new position in a stock, it is often worth taking a good look at.
SEC please accept these comments ..I completely agree with Goldman Sachs: More information is better.
Sincerely,
Mark Nagle