SEC’s Proposed Reporting Change Draws Scrutiny

The Securities and Exchange Commission has proposed a reduction in the number of firms required to disclose their U.S. equity-related securities by almost 90 percent, a move that “drew criticism from companies that have built businesses around such information and market observers who decried a potential loss of market transparency.” This according to a recent article in Institutional Investor.

The proposal, made earlier this month, would raise the threshold for firms required to report equity holdings (via the SEC’s Form 13F) from those with portfolios valued at $100 million to portfolios totaling over $3.5 billion. This would be the first such change since the regulation was first adopted in 1978.

According to the SEC announcement, the change is intended to “reflect proportionally the same market value of U.S. equities that $100 million represented in 1975.” If enacted, the article explains, the change would “result in nearly 90 percent of current filers—including hedge funds and mutual-fund firms—no longer being required to disclose their U.S. equity-related holdings.”

While some firms are cheering the proposed easing of filing requirements, those that have built businesses on analyzing filing information are not so happy. One such firm is WhaleWisdom, which updates 13F and related filings almost in real time. Founder Daniel Collins commented, “This is a huge loss in market transparency, and the ‘justification’ seems highly questionable.”

But the article suggests, “it is not entirely clear how useful the 13F information is,” noting that firms are not required to file until 45 days after the quarter’s end, making the information outdated (and therefore less useful) at the time of filing.

The article notes that the SEC is undergoing a 60-day comment period before adopting the change.