Recently, the U.S. Securities and Exchange Commission (SEC) announced a proposed amendment to quarterly disclosure of equity holdings on Form 13F, increasing the disclosure threshold from $100 million to $3.5 billion. We appreciate the SEC’s efforts to mitigate administrative costs for institutional investment managers. However, as a longtime advocate for reforming the U.S. capital markets, we believe that the reduced transparency resulting from this proposal could be harmful to public companies and investors.
The SEC has suggested that the proposal would reduce the number of filers by nearly 90%, but would retain disclosure of over 90% of the dollar value of holdings data currently disclosed through Form 13F. However, Nasdaq estimates that of the approximately 50,000 buy-side institutions, nearly 80% do not currently disclose via Form 13F . The proposal would prevent investors from accessing data for an additional $2.3 trillion worth of assets managed by 4,500 investment managers, and limit issuers’ transparency into their constituents and asset bases. 13Fs also serve as a critical tool to enhance benchmarking, shareholder engagement and other activities that could be impeded if the SEC proposal were adopted.
While the impact on total asset disclosure arguably would be limited, all issuers could be affected by the proposed amendment. Small- and micro-cap issuers could be particularly susceptible to a decrease in ownership transparency. Nasdaq estimates 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 assets invested in those companies .
While we await next steps from the SEC, we stand ready to support our clients through continued advocacy to ensure the right level of transparency for effective and efficient capital formation.
1: According to 13F data from March 31, 2020