August 4, 2020
This proposed rule will remove transparency into $2.3 trillion assets, ending quarterly reporting for 90% of asset managers.
The SEC is supposed to promote transparency and level the playing field. This rule is disadvantageous to the average investor in the following ways:
Not being able to identify over-owned/crowded stocks.
This proposal will limit future academic research for instance top 100 most popular stocks, top exits from manager portfolios over specified periods.
While the rule will remove the burdens of compliance on the smaller managers, this concern of the SEC is overstated. Managers know at the push of a button what they are invested in. It is just one extra report per quarter and most managers do provide monthly or quarterly risk reporting to their investors. Therefore, concerns of administrative burdens to the smaller manager are overstated.
Should there be another significant market correction, this will reduce the proposed number of reporting managers (now down from 5,000+ to 500 if this rule goes into effect).
As has been said in nearly all comments, for any investor, since when is less transparency a good thing? There should be more transparency during these uncertain times, and increased 13F reporting frequency. Furthermore, long, short and derivative positions should be included.
The pros of 13F reporting is that the investor can track if a manager is doing what they say on the prospectus e.g. if a small cap manager has a portfolio of large cap holdings, then that would be questionable to the investor. This rule takes that check away.
The proposal may affect the attraction of foreign capital to the U.S. The lack of transparency and level playing field may make potential investors wary of proper regulation within the capital markets.
While the proposed rule intends to stifle copycatting or front-running of smaller investment managers' portfolios, it will also increase chances of pump-and-dump among those managers that do not meet the reporting threshold, driving the prices of securities up.
It limits the data evaluation (and resources available) of the health of a company the retail investor looks at.
Please also view the statements given by Commissioner Allison Heren Lee:
https://www.sec.gov/news/public-statement/lee-13f-reporting-2020-07-10