NYSE Euronext, NIRI (National Investor Relations Institute) and the Society (Society of Corporate Secretaries & Governance Professionals) submitted a joint petition to the SEC requesting the SEC to reduce the time frame under which investors are required to report their holdings from 45 business days after the end of the quarter to two business days after the end of the quarter. Currently, the Exchange Act requires quarterly reporting, so a further reduction than quarterly reporting would require an act of Congress.
In addition to requesting a shortened 13(f) reporting period, the petition also encourages the SEC to raise the 13(f) beneficial ownership reporting rules with the appropriate Congressional oversight committees to establish monthly rather than quarterly reporting and advocates strong support for the SEC to review all Section 13 beneficial ownership reporting rules.
According to the press release:
Companies have been concerned for many years about the lack of transparency into who owns their stock. Being able to communicate with shareholders has become even more important for companies today in light of recent rule changes and other activism relating to corporate governance matters (eg. say on pay, proxy access, etc.). Accelerating the filing deadline of Section 13(f) reporting will help companies, investors and the market participants overall to have access to better, more timely information. Both shareholders and companies/boards are seeking to increase the dialog over corporate governance as well as other matters, like the company’s business/strategy, etc. This petition seeks to help further along that opportunity to connect.
It seems to me this is one area most can agree upon. If I have a proposal that will be voted on by other shareowners, I would like to be able to identify who they are. Do readers have any objection to this proposal? If so, please e-mail me the specifics and I will add an addendum. The proposed rule revision is as follows.
§ 240.13f-1 Reporting by institutional investment managers of information with respect to accounts over which they exercise investment discretion.
(a)(1) Every institutional investment manager which exercises investment discretion with respect to accounts holding section 13(f) securities, as defined in paragraph (c) of this section, having an aggregate fair market value on the last trading day of any month of any calendar year of at least $100,000,000 shall file a report on Form 13F (§ 249.325 of this chapter) with the Commission within
45two business days after the last day of such calendar year and within 45two business days after the last day of each of the first three calendar quarters of the subsequent calendar year.
Rebuttal from Andrew Shapiro: The proposed changes to required disclosure from 45 days down to only 2 days and increased from quarterly to monthly is not a good thing for common and institutional investors alike. First and foremost note that disclosure of positions gives away and diminishes any proprietary benefit managers of funds have to their original investment due diligence research. Best writings on the matter are from Phil Goldstein of Bulldog Advisors who likens his stock holdings to “trade secrets” as much as the protected formula used to make Coke, and contends that complying with the 13F rule “constitute[s] a ‘taking’ of [the fund’s] property without just compensation in violation of the Fifth Amendment to the Constitution.” See Do Hedge Funds Hold ‘Trade Secrets’?
Here is academic paper discussing the pro’s cons. Hogging the Hedge? Bulldog’s 13F Theory May Not Be So Lucky
If there is no disclosure delay or value in performing original research then managers will migrate to organizing and investing funds in vehicles that are not subject to such disclosure regimes. This will eventually reduce investment choices aggregating funds for regular investors.
Publisher: Good arguments from two strong voices for more democratic corporate governance whom I very much respect. I’ll be reformulating my own opinions on the issue.