Nasdaq Emphasizes Transparency Risk to SEC’s Form 13F Proposal, Backed by Over 300 Companies
On Tuesday, Nasdaq, with the support of 328 companies, submitted two filings to the U.S. Securities and Exchange Commission (SEC) in response to its proposed amendments to update Form 13F reporting thresholds, emphasizing how the proposal puts transparency at risk for both issuers and investors and undermines the current disclosure process.
In Nasdaq's comment letter, Chief Legal and Regulatory Officer John Zecca outlined how increasing the 13F disclosure threshold from $100 million to $3.5 billion would not only reduce transparency for public companies and their investors, but also impede stockholder engagement and deny retail investors and issuers critical information needed to make investment decisions. The second filing, which is a joint comment letter, shows support for our remarks from more than 300 companies from over 50 sectors and industries representing $3.3 Trillion in market cap, including Amgen, ADP, T-Mobile US and Zoom Video Communications.
The SEC announced the proposal in July, noting that it would be the first adjustment to the disclosure threshold in 40 years. By raising the threshold, the SEC argued that it could monitor the holdings of larger investment managers while reducing the burden on smaller managers.
"It seemed to us like a fairly significant step backward," Nasdaq Stock Exchange President Nelson Griggs told Business Insider. "We've heard from all sizes of companies, all sectors, and I will tell you, there is a belief that this is a pretty big step backward."
For Nasdaq and hundreds of companies, their concerns include the impact on the availability of holdings data, the reduction in transparency for public companies and the Commission’s lack of input on the proposal.
Regarding the latter, the joint comment letter notes that the SEC announced the proposal without first seeking input from public companies and taking into consideration the potential impact it would have on their businesses. To that end, Nasdaq and over 300 companies believe that the proposal would significantly reduce the extent of ownership information made available to public companies of all sizes. Critically, small-cap companies would suffer the most, with Nasdaq estimating that "managers in the $100 million to $3.5 billion range of reported assets currently allocate 10% of assets to small- and micro-cap companies, equating to 30% of the total assets invested in those companies." Furthermore, investors would no longer have data for an additional $2.3 trillion worth of assets managed by 4,500 investment managers.
"Nasdaq appreciates the Commission's efforts to lessen the expense- and regulatory-related burdens for small funds and to protect investment strategies. However, as a longtime advocate for disclosure transparency, we have concerns that the negative consequences of the proposal would in the end far outweigh the intended benefits," the filing stated.
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