[Federal Register Volume 85, Number 148 (Friday, July 31, 2020)]
[Proposed Rules]
[Pages 46016-46032]
[FR Doc No: 2020-15322]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 240 and 249

[Release No. 34-89290; File No. S7-08-20]
RIN 3235-AM65

Reporting Threshold for Institutional Investment Managers

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
proposing to update the reporting threshold for Form 13F reports by
institutional investment managers for the first time in 45 years,
raising the reporting threshold from $100 million to $3.5 billion to
reflect the change in size and structure of the U.S. equities market
since 1975, when Congress adopted the requirement for these managers to
file holdings reports with the Commission. The proposal also would
amend Form 13F to increase the information provided by institutional
investment managers by eliminating the omission threshold for
individual securities, and requiring managers to provide additional
identifying information. The Commission is also proposing to make
certain technical amendments, including to modernize the structure of
data reporting and amend the instructions on Form 13F for confidential
treatment requests in light of a recent decision of the U.S. Supreme
Court.

DATES: Comments should be received on or before September 29, 2020.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number S7-08-20 on the subject line;

Paper Comments

     Send paper comments to Vanessa A. Countryman, Secretary,
Securities

and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-08-20. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (http://www.sec.gov/rules/proposed.shtml). Comments are also available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. All comments received will be posted without change.
Persons submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly.
    Studies, memoranda, or other substantive items may be added by the
Commission or staff to the comment file during this rulemaking. A
notification of the inclusion in the comment file of any such materials
will be made available on the Commission's website. To ensure direct
electronic receipt of such notifications, sign up through the ``Stay
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Zeena Abdul-Rahman, Senior Counsel,
Mark T. Uyeda, Senior Special Counsel, at<PHONE_NUMBER>, or Brian
McLaughlin Johnson, Assistant Director, at<PHONE_NUMBER>, Investment
Company Regulation Office, Division of Investment Management,
Securities and Exchange Commission, 100 F Street NE, Washington, DC
20549-8549.

SUPPLEMENTARY INFORMATION: The Commission is proposing for public
comment amendments to 17 CFR 240.13f-1 (``rule 13f-1'') and Form 13F
(referenced in 17 CFR 249.325) under the Securities Exchange Act of
1934 (15 U.S.C. 78a et seq.) (``Exchange Act'').

Table of Contents

I. Background
    A. Overview of Section 13(f) and Rule 13f-1
    B. Legislative History and Subsequent Developments
II. Discussion and Economic Analysis
    A. Increase of Form 13F Reporting Threshold
    B. Future Analysis
    C. Omission Threshold for Form 13F
    D. Additional Identifying Information
    E. Technical Amendments
    F. Efficiency, Competition, and Capital Formation
III. Paperwork Reduction Act Analysis
    A. Form 13F
    B. Request for Comments
IV. Initial Regulatory Flexibility Analysis
V. Consideration of the Impact on the Economy
VI. Statutory Authority
Text of Proposed Rule and Form Amendments

I. Background

    The Commission is proposing to:
     Amend rule 13f-1 and Form 13F to raise the reporting
threshold from $100 million to $3.5 billion to account for the changes
in the size and structure of the U.S. equities market since 1975; and
     Eliminate the omission threshold for individual securities
on Form 13F.
    The Commission further proposes to amend Form 13F to require an
institutional investment manager (``manager'') that files Form 13F to
provide certain identifying information:
     If the manager has a number assigned to the manager by the
Central Registration Depository (``CRD'') system of the Financial
Industry Regulatory Authority, Inc. (``FINRA'') or by the Investment
Adviser Registration Depository (``IARD'') system (``CRD number''), the
manager would be required to provide the CRD number; and
     If a manager has a filing number assigned to the manager
by the Commission (``SEC filing number''), the manager would be
required to provide the SEC filing number.\1\
---------------------------------------------------------------------------

    \1\ The term ``institutional investment manager'' includes any
person, other than a natural person, investing in or buying and
selling securities for its own account, and any person exercising
investment discretion with respect to the account of any other
person. See section 13(f)(6)(A) of the Exchange Act [15 U.S.C.
78m(f)(6)]. The term ``person'' includes any natural person,
company, government, or political subdivision, agency, or
instrumentality of a government. See section 3(a)(9) of the Exchange
Act [15 U.S.C. 78c(a)(9)].
---------------------------------------------------------------------------

    Finally, the Commission proposes to make certain technical
amendments to modernize the information reported on Form 13F,
consistent with its existing structured eXtensible Markup Language
(``XML'') format, and to modify the standard applied to certain types
of requests to the Commission for confidential treatment of Form 13F
information (``Form 13F CTRs'') to make such standard consistent with a
recent U.S. Supreme Court decision.\2\
---------------------------------------------------------------------------

    \2\ Food Marketing Institute v. Argus Leader Media, 139 S. Ct.
2356 (2019).
---------------------------------------------------------------------------

A. Overview of Section 13(f) and Rule 13f-1

    Adopted in 1975 as part of the Securities Acts Amendments of 1975
(``1975 Amendments''),\3\ section 13(f) of the Exchange Act \4\
requires a manager to file a report with the Commission if the manager
exercises investment discretion with respect to accounts holding
certain equity securities (``13(f) securities'') \5\ having an
aggregate fair market value on the last trading day of any month of any
calendar year of at least $100 million.\6\ Rule 13f-1 requires that
managers file quarterly reports on Form 13F if the accounts over which
they exercise investment discretion hold an aggregate of more than $100
million in 13(f) securities.\7\ The information reported on Form 13F
becomes publicly available upon filing, unless the manager has filed a
Form 13F CTR.\8\ A Form 13F CTR is confidential pending review pursuant
to 17 CFR 240.24b-2(c) (``rule 24b-2(c)''). The staff of the Division
of Investment Management has delegated authority from the Commission to
grant and deny Form 13F CTRs, and to revoke a grant of confidential
treatment for any Form 13F CTR.\9\
---------------------------------------------------------------------------

    \3\ Public Law 94-29, 89 Stat. 97 (1975).
    \4\ 15 U.S.C. 78m(f).
    \5\ Rule 13f-1(c) under the Exchange Act defines ``section 13(f)
securities'' to mean equity securities of a class described in
section 13(d)(1) of the Exchange Act that are admitted to trading on
a national securities exchange or quoted on the automated quotation
system of a registered securities association. The Commission is
required under section 13(f)(4) to publish a list of section 13(f)
securities, which can be found at www.sec.gov/divisions/investment/13flists.htm.
    \6\ Section 13(f)(1) of the Exchange Act [15 U.S.C. 78m(f)(1)].
    \7\ See General Instruction 3 of Form 13F. Form 13F requires
managers to disclose, for example, the name, Form 13F file number,
and address of the manager, and, for each security being reported,
the name of the issuer, title of class, CUSIP, market value, amount
and type of security, and whether the manager has investment
discretion and voting authority for that security.
    \8\ See Sections 13(f)(4) and (5) of the Exchange Act and 17 CFR
240.24b-2 (``rule 24b-2'') under the Exchange Act. A Form 13F CTR
consists of two parts: A written request letter (the
``application,'' per 17 CFR 240.24b-2(b)(2)) and a paper,
confidential Form 13F for the same calendar quarter as the public
Form 13F that includes only the equity holding(s) for which
confidential treatment is being requested (the ``confidential
portion,'' per 17 CFR 240.24b-2(b)(1)). A Form 13F CTR must be filed
in paper with the Secretary of the Commission. See 17 CFR 240.24b-
2(b)(3). While section 13(f)(4) of the Exchange Act gives the
Commission discretion to determine whether to grant Form13F CTRs,
section 13(f)(4) also prohibits the Commission from publicly
disclosing information that identifies the securities held by the
account of a natural person, estate, or trust (other than a business
trust or investment company).
    \9\ 17 CFR 200.30-5(c-1) and (c-2).
---------------------------------------------------------------------------

    Section 13(f) of the Exchange Act gives the Commission broad
rulemaking authority to determine the size of the institutions required
to file reports, the format and frequency of the reporting
requirements, and the information to be

disclosed in each report.\10\ Section 13(f)(1) authorizes the
Commission to set the reporting threshold in an amount ``of at least
$100,000,000 or such lesser amount'' by rule.\11\ In addition, section
13(f)(3) authorizes the Commission to exempt any manager or class of
managers from the reporting requirements of section 13(f).\12\ The 1975
Amendments Senate Report stated that the Commission would ``have
authority to raise or lower'' the threshold.\13\ The 1975 Amendments
Senate Report also indicated that, in setting the reporting threshold
for Form 13F, the Commission should consider, among other factors, the
compliance burdens of reporting and the marginal informational value
provided by the disclosure.\14\ Additionally, in exercising its
authority under section 13(f), the Commission is required to consult
with other agencies, including federal, state, and self-regulatory
organizations.\15\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78m(f)(1); see also Filing and Reporting
Requirements Relating to Institutional Investment Managers, Exchange
Act Release No. 14852 (June 15, 1978) [43 FR 26700, 26701 (June 22,
1978)] (``13F Adopting Release'') at text accompanying n.5.
    \11\ However, the Commission does not have the authority to
lower the reporting threshold under section 13(f)(1) to less than
$10 million. See 15 U.S.C. 78m(f)(1).
    \12\ 15 U.S.C. 78m(f)(3).
    \13\ See Securities Acts Amendments of 1975: Hearings on S. 249
before a Subcomm. of the Senate Comm. on Banking, Housing and Urban
Affairs, 94th Cong., 1st Sess. (S. Report No. 94-75) (1975), at 107
(``1975 Amendments Senate Report'').
    \14\ Id. at 86 (stating that, in establishing a reporting
threshold, the Commission should ``balance such costs and burdens to
the public interest that would be served by the expected
informational value of the marginal equity securities holdings which
would then be subject to the reporting provisions'').
    \15\ 15 U.S.C. 78m(f)(5). Specifically, the statute requires the
Commission to consult with the Comptroller General of the United
States, the Director of the Office of Management and Budget,
national securities exchanges, registered securities associations,
and the appropriate regulatory agencies, federal and state
authorities which, directly or indirectly, require reports from
managers of information substantially similar to that called for by
section 13(f). Section 3(a)(34)(F) defines ``appropriate regulatory
agency'' for these purposes as the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, and the Federal
Deposit Insurance Corporation. 15 U.S.C. 78c(a)(34)(F) (defining
``appropriate regulatory agency'' when used with respect to a person
exercising investment discretion over an account). We will complete
our consultation with these agencies during the comment period of
this proposal in accordance with section 13(f)(5).
---------------------------------------------------------------------------

    In 1978, the Commission implemented the reporting requirement of
section 13(f) by adopting rule 13f-1 and Form 13F.\16\ In designing
Form 13F, the Commission stated that it attempted to structure the form
in a manner that would provide useful data regarding holdings that
would impact the markets, while minimizing the form's reporting
burdens.\17\ In 1999, the Commission required electronic filing of
public Form 13F reports through the Commission's Electronic Data
Gathering, Analysis, and Retrieval (``EDGAR'') system.\18\
---------------------------------------------------------------------------

    \16\ See 13F Adopting Release, supra footnote 10.
    \17\ See Reporting by Institutional Investment Managers of
Information with Respect to Accounts over which Investment
Discretion is Exercised, Exchange Act Release No. 13396 (Mar. 22,
1977) [42 FR 16831, 16832 at n.7 (Mar. 30, 1977)]. See also 13F
Adopting Release, supra footnote 10.
    \18\ See Rulemaking for EDGAR System, Investment Company Act
Release No. 23640 (Jan. 12, 1999) [64 FR 2843 (Jan. 19, 1999)]. In
2013, the Commission modernized the filing format of Form 13F by
replacing the plain-text ASCII format with a structured XML format
and accompanying online form, but did not make any substantive
changes to the Form. See Adoption of Updated EDGAR Filer Manual,
Investment Company Act Release No. 30515 (May 14, 2013) [78 FR 29616
(May 21, 2013)].
---------------------------------------------------------------------------

B. Legislative History and Subsequent Developments

    Section 13(f) was added to the Exchange Act following a study the
Commission conducted at Congress's direction, which concluded that
there were certain ``gaps in information about the purchase, sale and
holdings of securities by major classes of institutional investors.''
\19\
---------------------------------------------------------------------------

    \19\ See 13F Adopting Release, supra footnote 10 at n.3 and
accompanying text.
---------------------------------------------------------------------------

    The section 13(f) disclosure program had three primary goals.
First, to create a central repository of historical and current data
about the investment activities of institutional investment managers.
Second, to improve the body of factual data available regarding the
holdings of institutional investment managers and thus facilitate
consideration of the influence and impact of institutional investment
managers on the securities markets and the public policy implications
of that influence. Third, to increase investor confidence in the
integrity of the U.S. securities markets.\20\
---------------------------------------------------------------------------

    \20\ See 13F Adopting Release, supra footnote 10 at n.4 and
accompanying text; see also Thomas P. Lemke and Gerald T. Lins,
Equity Holdings by Institutional Investment Manager: An Analysis of
Section 13(f) of the Securities Exchange Act of 1934, 43 Bus. Law
93, 94 n.7 (Nov. 1987); Office of the Inspector General, Review of
the SEC's 13(f) Reporting Requirements (Sept. 27, 2010), available
at https://www.sec.gov/about/offices/oig/reports/audits/2010/480.pdf
(``OIG Report'').
---------------------------------------------------------------------------

    Legislative history indicates that the reporting threshold of
section 13(f) was designed so that reporting would cover a large
proportion of managed assets, while minimizing the number of reporting
persons. The $100 million threshold that was adopted thereby limited
the burdens of reporting, particularly on smaller managers. The 1975
Amendments Senate Report noted that, at the time of the section's
adoption, approximately 300 persons--holding about 75 percent of the
dollar value of all institutional equity security holdings--would be
subject to the reporting requirements.\21\ The 1975 Amendments Senate
Report reasoned that, by setting the threshold at $100 million, the
burdens associated with filing Form 13F would be limited to ``the
largest institutional investment managers'' and, therefore, the new
filing requirements could be ``implemented rapidly with the least
amount of unnecessary costs and burdens on the potential respondents.''
\22\
---------------------------------------------------------------------------

    \21\ The 1975 Amendments Senate Report indicated that section
13(f) would increase public availability of information regarding
the securities holdings of institutional investment managers. See
supra footnote 13, at 85.
    \22\ 1975 Amendments Senate Report, supra footnote 13, at 87.
---------------------------------------------------------------------------

    Since 1975, the relative significance of managing $100 million in
securities as compared with the overall size of the U.S. equities
market has declined considerably. More managers have become subject to
the Form 13F reporting obligation, even though $100 million represents
a much smaller fraction of the U.S. equities market, which has grown
substantially in aggregate size. Figure 1 shows the rise in the number
of managers that file Form 13F over time.\23\
---------------------------------------------------------------------------

    \23\ Data presented after 1999 only includes managers that file
Form 13F holdings and combination reports (together, ``Form 13F-
HR'') under rule 13f-1. In some instances, two or more managers may
exercise investment discretion with respect to the same securities.
In these cases, subject to certain conditions, Form 13F permits one
such institutional manager to report those securities on behalf of
the other(s). A manager on whose behalf securities are reported,
generally, must file an abbreviated ``notice'' report on Form 13F to
identify the manager(s) reporting on its behalf (``Form 13F-NT'').
See General Instruction 2 to Form 13F (requiring that, where two
managers exercise investment discretion with respect to the same
securities, only one such manager include information regarding
those securities in its Form 13F report).

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TP31JY20.025

    Figure 2 shows the significant increase in the overall size of the
U.S. equities market over time and the resulting decrease in the market
significance of managing $100 million in securities as compared with
the overall size of the market.
[GRAPHIC] [TIFF OMITTED] TP31JY20.026

    Today, 5,089 managers that exceed the $100 million threshold file
Form 13F holding reports.\24\ This is approximately 17 times the number
of filers that the threshold covered in 1975. The 1975 Amendments
Senate Report anticipated that the Commission would consider the costs
and burdens on smaller institutional investment managers in preparing
Form 13F reports.\25\ Given the significant increase in the number of
managers required to file 13F reports over the last two decades, and
the substantial reduction in the significance of holdings of $100
million, we believe it is an appropriate time to adjust the reporting
threshold.
---------------------------------------------------------------------------

    \24\ See infra footnote 40 (noting that an additional 1,570
managers filed a notice report on Form 13F-NT for December 31,
2018).
    \25\ See 1975 Amendments Senate Report, supra footnote 13
(noting that the Commission represented to the Senate that, before
it reduced the 13(f) reporting threshold, it would consider the cost
and burden to such smaller managers of preparing such reports).
---------------------------------------------------------------------------

II. Discussion and Economic Analysis

A. Increase of Form 13F Reporting Threshold

    We are proposing to amend rule 13f-1 and Form 13F to raise the
reporting threshold for Form 13F to $3.5 billion.\26\ This adjustment
is based on the growth of the U.S. equities market that occurred
between the adoption of section 13(f) in 1975 and December 2018, and it
is designed to reflect proportionally the same market value of U.S.
equities that $100 million represented in 1975.\27\
---------------------------------------------------------------------------

    \26\ For purposes of determining whether a manager is required
to file Form 13F, the new reporting threshold would be evaluated for
all months of the calendar year in which the adoption of the new
reporting threshold occurs. Thus, if the Commission were to adopt an
increased reporting threshold in 2020, the increased threshold would
be used to determine Form 13F filing obligations for the cycle
starting with the year ending December 31, 2020. The first Form 13F
report that would apply the new reporting threshold would be due
within 45 days after the end of such calendar year.
    \27\ Proposed rule 13f-1(a)(1); see also proposed General
Instruction 1 of Form 13F. We calculated the growth of the U.S.
equities market from 1975 until 2018 using statistical data provided
by the Federal Reserve System. See Federal Reserve Board, Flow of
Funds Chart L.223 for domestic corporate equities, available at
https://www.federalreserve.gov/releases/z1/current/default.htm
(``Federal Reserve Data''). The ratio of U.S. equities market value
in 2018 to U.S. equities market value in 1975 is 3,571.41 percent.
We multiplied that ratio by $100 million and rounded to the nearest
$500 million, which resulted in a dollar value of $3.5 billion.
Because the proposed reporting threshold is a figure in the
billions, we believe that rounding to the nearest $500 million is
appropriate.
---------------------------------------------------------------------------

    We have received recommendations from persons representing a
variety of different perspectives to increase the reporting threshold
for Form 13F.\28\ For example, in response to our rulemaking on
shareholder reports and quarterly portfolio disclosure of mutual funds,
two commenters in a joint letter suggested that the 13(f) reporting
threshold should be raised to reflect the ``effects of market
inflation.'' \29\ The Commission's Office of Inspector General
recommended that the staff update its analysis of the impact of
increasing the reporting threshold of $100 million for section 13(f) in
order to determine whether an increase in the threshold amount should
be pursued.\30\ Another commenter called for legislation that would
increase the reporting threshold to $450 million to reflect a consumer
price index (``CPI'') adjustment from 1976 to 2019, with an adjustment
every five years thereafter to reflect changes in the CPI, to ease the
reporting burden on smaller investors.\31\
---------------------------------------------------------------------------

    \28\ The Commission has also received petitions for rulemakings
regarding other aspects of Form 13F. We believe that it is
appropriate to propose changes to the scope of managers required to
file reports on Form 13F before considering other potential
amendments to the Form. See Petition for Rulemaking Under Section
13(f) of the Securities Exchange Act of 1934 (Feb. 1, 2013),
available at https://www.sec.gov/rules/petitions/2013/petn4-659.pdf
(requesting that the Commission amend rule 13f-1(a)(1) to shorten
the 45-day delay in Form 13F's reporting deadline); see also
Petition for Rulemaking Pursuant to Sections 10 and 13(f) of the
Securities Exchange Act of 1934 (October 7, 2015), available at
https://www.sec.gov/rules/petitions/2015/petn4-689.pdf (requesting
that the Commission consider requiring periodic public disclosure of
short-sale activities of managers on Form 13F).
    \29\ See letter from Fund Democracy and Consumer Federation of
America, File No. S7-51-02 (Feb. 14, 2003). The commenters noted
that ``[t]he $100 million threshold was based on the impact that
such a portfolio could have on the market at the time that Section
13(f) was adopted. If the same standard were applied today, the
threshold would exceed $1 billion dollars. The $100 million
threshold no longer accomplishes the stated purpose of Form 13F
disclosure.''
    \30\ See OIG Report, supra footnote 20, at 27. The OIG Report
noted that, in 2006, the staff performed an analysis of increasing
the Form 13F reporting threshold to $300 million, which reflected
inflation using the consumer price index, and staff concluded that
such an adjustment to the threshold would result in a significant
decrease in the number of institutional investment managers that
would be required to file Form 13F, with only a relatively modest
decrease in the total dollar amount of assets covered.
    \31\ See National Investor Relations Institute, The Case for 13F
Reform (Sept. 25, 2019), available at https://www.niri.org/NIRI/media/NIRI/Advocacy/NIRI-Case-for-13F-Reform-2019-final.pdf.
---------------------------------------------------------------------------

    We believe that increasing the reporting threshold would provide
meaningful regulatory relief for smaller managers that manage less than
$3.5 billion in 13(f) assets and would no longer have to file the form
in terms of a reduction in direct compliance costs and indirect costs.
We believe that some of the direct compliance costs associated with
preparing filings on Form 13F have decreased since 1975, principally
due to lower-cost information processing systems. However, we believe
that direct compliance costs are likely to be proportionately higher
for smaller managers than they are for larger managers.\32\ For
example, in connection with staff outreach to advisers to smaller fund
complexes, these advisers stated that reporting on Form 13F involves
significant compliance burdens. Other indirect costs also may have
increased since 1975, especially for smaller managers. For example,
public reports of smaller managers, as compared with larger managers,
may be more likely to reflect a limited number of separately managed
portfolios that follow the same style or reflect the investment
behavior of a single portfolio manager.\33\ Consequently, Form 13F data
of smaller managers may be more likely to be used by other market
participants to engage in behavior that is damaging to the manager and
the beneficial owners of the managed portfolio, such as front running
(which primarily harms the beneficial owners) or copycatting (which
potentially harms the portfolio manager), which may increase the costs
of investing for smaller managers and hinder their investment
performance.\34\
---------------------------------------------------------------------------

    \32\ See infra discussion accompanying and following footnote 43
(discussing the direct compliance costs and indirect costs
associated with Form 13F); see also Section III below for a
discussion of estimated information collection burdens associated
with Form 13F under the Paperwork Reduction Act.
    \33\ See Marshall E. Blume and Donald B. Keim, The Changing
Nature of Institutional Stock Investing, 6 Critical Fin. Rev. 1
(2017) (``Blume and Keim'') at 3-4.
    \34\ See e.g., Susan E.K. Christoffersen, Erfan Danesh, and
David Musto, Why Do Institutions Delay Their Shareholdings? Evidence
from Form 13F, (Working Paper, June 11, 2018) (``Chistoffersen,
Danesh and Musto''), available at https://www.bwl.uni-mannheim.de/media/Lehrstuehle/bwl/Area_Finance/Finance_Area_Seminar/HWS2018/Christoffersen_Paper.pdf (explaining that a frontrunner is one who
trades ``in front of an expected trade by another investor, thereby
making the same trade on the terms the other investor would
otherwise have got.''); see also Mary Margaret Frank, et al.,
Copycat Funds: Information Disclosure Regulation and the Returns to
Active Management in the Mutual Fund Industry, 47 J.L. & Econ. 515
(2004) (``Frank et al. 2004'') (explaining that copycat funds
``purchase the same assets as actively-managed funds as soon as
those asset holdings are disclosed.'').
---------------------------------------------------------------------------

    Smaller managers also account for a significant proportion of the
Form 13F CTRs filed with the Commission. Managers with less than $3.5
billion of 13(f) securities manage 9.2 percent of the dollar value of
all reported securities, yet our staff estimates that those smaller
managers submit approximately three-fourths of all the Form 13F CTRs
filed (see Table 1). Additionally, smaller managers may have limited
resources, which might

make it difficult for them to file Form 13F CTRs in order to protect
their holdings information from harmful behaviors and the costs of
those behaviors.
    Our staff regularly receives inquiries and requests for assistance
from managers regarding compliance with the Form 13F reporting
obligations. Smaller managers make many of the requests. In addition to
relieving smaller managers from the compliance burdens associated with
filing Form 13F (and Form 13F CTRs), our proposal would also reduce the
costs to the Commission associated with administering the regulatory
program for Form 13F by reducing the number of inquiries and requests
for assistance the staff receives and the associated time needed for
staff review.
    We considered various approaches to adjusting the reporting
threshold, including the use of:
     Stock Market Growth: Using the growth in value of U.S.
public corporate equities from 1975 until 2018 as the basis for
calculating the threshold increase, the threshold would be $3.57
billion.\35\
---------------------------------------------------------------------------

    \35\ Based on the Federal Reserve Data, supra footnote 27.
---------------------------------------------------------------------------

     Consumer Price Inflation: We evaluated two potential
consumer price inflation calculations:
    [cir] Using the Personal Consumption Expenditures Price Index
(``PCE'') inflation standard through 2018, the threshold would be $358
million.\36\
---------------------------------------------------------------------------

    \36\ Based on the Personal Consumption Expenditures Chain-Type
Price Index, published by the U.S. Department of Commerce.
---------------------------------------------------------------------------

    [cir] Using the CPI inflation standard through 2018, the threshold
would be $453 million.\37\
---------------------------------------------------------------------------

    \37\ Based on the Consumer Price Index for All Urban Consumers,
published by the Bureau of Labor Statistics of the U.S. Department
of Labor.
---------------------------------------------------------------------------

     Stock Market Returns: Using the total return of the stock
market from the end of December 1975 to the end of December 2018 as the
basis for calculating the threshold increase, the threshold would be
$9.33 billion.\38\
---------------------------------------------------------------------------

    \38\ We assembled monthly value-weighted market returns with
dividends reinvested from the Center for Research in Security
Prices. We compounded these returns from January 1976 to December
2018, and we multiplied that product by $0.100 billion, which
resulted in $9.33 billion.
---------------------------------------------------------------------------

    Table 1 demonstrates how changing the reporting threshold for
section 13(f) would affect the number of filers at different threshold
amounts and the aggregate holdings reported by such filers.\39\
---------------------------------------------------------------------------

    \39\ The staff compiled this data by reviewing filings made on
Form 13F during the relevant period. The data excludes securities
reported as options on Form 13F. The staff has adjusted the reported
data to account for what appeared to be erroneously reported
information, such as data that is reported in the wrong units.
    \40\ This data covers Form 13F-HR, but excludes Form 13F-NT. An
additional 1,570 managers filed a Form 13F-NT for December 31, 2018.
Using this data, we cannot determine precisely how many of these
additional 1,570 managers would no longer need to file Form 13F-NT
if the reporting threshold is increased. Therefore, if a Form 13F-NT
filer is linked to a Form 13-HR filing of a manager that exceeds the
3.5 billion threshold, we assumed that such a manager would be
required to file Form 13F-NT if the reporting threshold is increased
as proposed. Therefore, we estimate that 738 notice reports would be
filed on Form 13F-NT if the proposed threshold increase is adopted.
    Certain aspects of the Form 13F reporting structure make it
difficult to pinpoint the exact value of reported holdings for an
individual manager. The staff analysis excludes holdings reported as
options. In addition, not all holdings may be reported due to Form
13F CTRs and managers may omit a holding if they hold fewer than
10,000 shares and less than $200,000 in aggregate fair market value.
Therefore, the actual number of Form 13F filers above the threshold,
the aggregate assets of filers above the threshold, and the
percentage of all assets may be higher.

                                  Table 1--Form 13F Reporting Threshold Changes
                               [13F Holdings Filings as of December 31, 2018 \40\]
                                     Total Number of Holdings Filers: 5,089
                                    Total Reported Assets (billions): $25,198
----------------------------------------------------------------------------------------------------------------
                                                                                Aggregate    Percent of the
                                     Number of       Number of      Percent of       assets of     dollar value
            Threshold              filers above    filers below    filers below    filers above       of all
                                     threshold       threshold       threshold       threshold       reported
                                                                                (billions)        assets
----------------------------------------------------------------------------------------------------------------
>=$100 billion..................              37           5,052            99.3          14,286            56.7
>=$30 billion...................             114           4,975            97.8          18,605            73.8
>=$25 billion...................             122           4,967            97.6          18,824            74.7
>=$10 billion...................             278           4,811            94.5          21,261            84.4
>=$5 billion....................             441           4,648            91.3          22,427            89.0
>=$4.5 billion..................             467           4,622            90.8          22,550            89.5
>=$4 billion....................             500           4,589            90.2          22,688            90.0
>=$3.5 billion..................             550           4,539            89.2          22,876            90.8
>=$3 billion....................             597           4,492            88.3          23,027            91.4
>=$2.5 billion..................             672           4,417            86.8          23,233            92.2
>=$2 billion....................             790           4,299            84.5          23,494            93.2
>=$1.5 billion..................             955           4,134            81.2          23,780            94.4
>=$1 billion....................           1,227           3,862            75.9          24,113            95.7
>=$900 million..................           1,301           3,788            74.4          24,183            96.0
>=$800 million..................           1,407           3,682            72.4          24,273            96.3
>=$700 million..................           1,532           3,557            69.9          24,366            96.7
>=$600 million..................           1,710           3,379            66.4          24,481            97.2
>=$500 million..................           1,904           3,185            62.6          24,588            97.6
>=$400 million..................           2,188           2,901            57.0          24,716            98.1
>=$300 million..................           2,543           2,546            50.0          24,838            98.6
>=$200 million..................           3,148           1,941            38.1          24,985            99.2
>=$100 million..................           5,089               0             0.0          25,198           100.0
----------------------------------------------------------------------------------------------------------------

    We considered raising the threshold to account for consumer price
inflation, rather than market growth. However, we preliminarily
determined that the group of managers covered by using a market growth
standard better reflects the group of managers intended to be subject
to reporting under section 13(f) because this approach focuses on
managers whose holdings of section 13(f) securities are large relative
to the overall

size of the U.S. equities market.\41\ Raising the reporting threshold
for rule 13f-1 to $3.5 billion, which would account for the growth in
the U.S. equities market since 1975, would retain disclosure of 90.8
percent of the dollar value of the Form 13F holdings data currently
reported while relieving the reporting burdens from approximately 4,500
Form 13F filers, or approximately 89.2 percent of all current
filers.\42\
---------------------------------------------------------------------------

    \41\ See supra footnote 22 and accompanying text (noting that
the 1975 Amendments Senate Report stated that the Form 13F reporting
threshold was designed to limit the form's filing obligations to
``the largest institutional investment managers'').
    \42\ Since December 31, 2018, there have been significant
fluctuations in the market that may impact our analysis.
---------------------------------------------------------------------------

    Managers incur direct compliance costs, including information
collection costs,\43\ associated with Form 13F. These costs include the
following: (1) Developing and maintaining internal hardware and
software systems to collect and analyze the information for submission;
\44\ (2) utilizing internal and external legal and compliance resources
for advice and review in connection with Form 13F filings and to
analyze whether any holdings qualify for confidential treatment and, if
so, to prepare and submit a request for confidential treatment; (3)
preparing the information for submission to the EDGAR system; and (4)
undertaking other reviews or compliance activities as part of the
manager's overall compliance program, such as comparisons of the data
reported on Form 13F against other regulatory filings that may have
similar data reporting obligations to confirm that information is
reported consistently across multiple regulatory filings, as
applicable.
---------------------------------------------------------------------------

    \43\ See Section III below for a discussion of estimated
information collection costs associated with Form 13F under the
Paperwork Reduction Act.
    \44\ We believe that funds generally do not maintain dedicated
hardware systems for the sole purpose of filing Form 13F. Our cost
estimates therefore are intended to take into account only the
partial cost of those systems attributable to filing Form 13F.
---------------------------------------------------------------------------

    Based on staff analysis and outreach to managers, we estimate that,
for the smaller managers that would no longer file reports on Form 13F
under the proposal, these direct compliance costs could range from
$15,000 to $30,000 annually per manager, depending on the complexity
and volume of holdings, the type of third-party legal and compliance
review undertaken prior to the filing, and a filer's experience with
filing Form 13F, among other factors. Therefore, we estimate that the
direct compliance cost savings for these managers per year would range
from $68.1 million to $136 million.\45\ We believe that larger managers
that would continue to be required to file reports on Form 13F under
the proposal incur higher direct compliance costs, on a per manager
basis, than the smaller managers.
---------------------------------------------------------------------------

    \45\ These estimates are based on the following calculations:
4,539 filers x $15,000 = $68,085,000; 4,539 filers x $30,000 =
$136,170,000. This is based on our estimate that 4,539 managers
would no longer be required to file reports on Form 13F-HR under the
proposal. These estimates do not include direct compliance costs for
managers filing notice reports on Form 13F-NT. The information
collection burdens associated with these filings are included in the
estimates discussed below in Section III.
---------------------------------------------------------------------------

    In addition to these direct compliance costs, managers face
indirect costs such as the potential for front-running and copycatting.
The key determinant of these indirect costs is whether the disclosure
of holdings information enables other market participants to take
actions that harm either the beneficial owners of the fund or its
manager.
    The academic literature provides partial evidence about the harm
caused by the actions of third parties that is applicable in the
context of the proposed amendments. For example, several studies show
that managers use confidential treatment requests to delay reporting
stocks on Form 13F that have higher future returns than their other
stocks, but these studies do not directly verify that the delayed
stocks do not continue to have high future returns after the end of the
confidential treatment period.\46\ Other researchers show that managers
who are more likely to face front-running costs choose to file at the
end of the 45-day filing window, but they do not show whether or to
what extent the delay to the end of the filing window eliminates the
potential front-running costs.\47\ Many studies test for copycatting
profits by simulating funds that copy reported 13F portfolios, and the
studies generally find that some copycat funds can match the
performance of the copied funds, although they do not directly test
whether this behavior harms managers or beneficial owners of the copied
funds.\48\ In addition, one study examines hedge funds around the time
they begin filing Form 13F. The study suggests that hedge funds
experience decreased performance after Form 13F disclosure, and it
reports that this drop in performance may be ``due to the revelation of
trade secrets and free-riding activities.'' \49\
---------------------------------------------------------------------------

    \46\ See George O. Aragon, Michael Herzel, and Zhen Shi, Why Do
Hedge Funds Avoid Disclosure? Evidence from Confidential 13F
Filings, 48 J. Fin. & Quantitative Analysis, 1499 (Oct. 2013); see
also Agarwal Vikas, Wei Jiang, Yuehua Tang, and Baozhong Yang,
Uncovering Hedge Fund Skill from the Portfolio Holdings They Hide,
68 J. Fin. 739 (2013).
    \47\ See Chistoffersen, Danesh and Musto, supra footnote 34 at
23.
    \48\ See Frank et al. 2004, supra note 34; see also Marno
Verbeek and Yu Wangb, Better than the Original? The Relative Success
of Copycat Funds, 37 J. Banking & Fin. 3454 (2013); see also
Chistoffersen, Danesh and Musto, supra footnote 34.
    \49\ See Shi, Zhen, The Impact of Portfolio Disclosure on Hedge
Fund Performance (2017) the Journal of Financial Economics, Vol.
126, at 38 (``Shi (2017)'') (finding (a) an annual reduction of
certain hedge funds' performance after they begin filing Form 13F,
(b) that ``the return correlations between disclosing funds and
other hedge funds that are in the same investment style increase
after the disclosure,'' and (c) that ``the negative effect of
disclosure is concentrated among funds that hold more illiquid
stocks, have lower turnover rates, have greater portfolio
concentration, are in more competitive investment styles, have
performed well in the past, employ less conventional trading
strategies, or belong to an asset management company with a smaller
number of funds'').
---------------------------------------------------------------------------

    Under the proposed amendments, the aggregate value of section 13(f)
securities reported by managers would represent approximately 75
percent of the U.S. equities market as a whole, as compared with 83
percent without the proposed amendments and 40 percent in 1981, the
earliest year for which Form 13F data is available.\50\ The proposed
amendments to the Form 13F reporting threshold thus also reflect the
changes in the structure of the market that have occurred over time.
---------------------------------------------------------------------------

    \50\ This data is based on the staff's review of data reporting
on Form 13F and Federal Reserve Data.
---------------------------------------------------------------------------

    Using CPI or PCE would result in a reporting threshold of $500
million and $400 million, respectively (applying a rounding convention
to the nearest $100 million). The decrease in the dollar value of the
reported holdings would be either about 2.4 percent or 1.9 percent, and
the decrease in the number of current filers would be about 3,200 or
2,900, respectively. In the years since 1975, the overall size of the
U.S. equities market has grown at a rate significantly higher than the
CPI or PCE. The legislative history indicates that the reporting
threshold of section 13(f) was designed to focus on larger managers. We
therefore believe that relying on a consumer price inflation measure
such as CPI or PCE to account for 45 years of market growth would not
adequately or appropriately capture the holdings and universe of
managers contemplated by section 13(f).
    Using stock market returns from December 1975 to December 2018,
rather than market growth, would result in a reporting threshold of
$9.5 billion, rounded to the nearest $500 million. The decrease in the
dollar value of the reported holdings would be about 15.2 percent and
the decrease in the number of current filers would be about 4,800. We
believe that section 13(f) was

intended to provide transparency into a certain segment of the
securities markets--the equity holdings by larger institutional
investment managers. Therefore, we believe that it is more appropriate
to increase the reporting threshold based on the growth of the U.S.
equities market rather than the returns generated by the stock market.
Our preliminary decision to use market growth to adjust the reporting
threshold is designed to require managers to file on Form 13F when
their holdings of section 13(f) securities approximate the same
percentage of the U.S. equities market that was represented by the $100
million threshold in 1975. If we were to use stock market returns
instead, however, the holdings of individual managers required to
report under this threshold would not approximate the same percentage
of the U.S. equities market that was represented by the $100 million
threshold in 1975.
    We have considered the potential effects of the reduction in Form
13F data received from smaller managers, and we understand that the
information reported on Form 13F currently is used for a wide variety
of purposes. Since Form 13F data became publicly available, different
uses for the data have developed. These uses developed, in part, due to
the increased volume of Form 13F data as more and more managers became
subject to the filing requirement. While Form 13F was originally
designed to assist regulators and the public in understanding the
effects of institutional equity ownership on the markets, the pool of
users of the data has expanded to include academics, market
researchers, the media, attorneys pursuing private securities class-
action matters, and market participants (including institutional
investors themselves) who use the data to enhance their ability to
compete.\51\ The data can also assist individuals in making investment
decisions, investment managers in managing assets, and corporate
issuers of 13(f) securities interested in determining the beneficial
holders of their publicly traded stock.\52\ Commission staff also uses
Form 13F information for a variety of purposes, some of which were
specifically identified in the legislative history of section 13(f),
while others were not. Since section 13(f) was adopted in 1975, data
available to the Commission about the investment activities of
institutional investment managers has been greatly expanded and
includes data from sources other than Form 13F, such as Form N-PORT.
Commission staff currently uses Form 13F and other data regarding the
investment activities of institutional investment managers in
rulemakings, to support the Commission's examination and enforcement
programs, and to conduct research. For example, Commission staff may
use investor information from Form 13F on a relatively infrequent basis
in estimating shareholder harm as well as shareholder turnover, which
may be considered in the context of potential corporate penalties,
including in determining whether proposed penalties would cause further
harm to shareholders who suffered losses as a result of the violation.
Commission staff typically will have access to additional data sources
for these estimates, including Form N-PORT, and the Commission
generally does not expect the proposed amendments to the Form 13F
reporting thresholds to impact the staff's recommendations regarding
the imposition or amounts of corporate penalties.
---------------------------------------------------------------------------

    \51\ Commission staff has noted that ``meritorious private
actions have long been recognized as an important supplement to
civil and criminal law-enforcement actions.'' See Study on the
Cross-Border Scope of the Private Right of Action under Section
10(b) of the Securities Exchange Act of 1934, available at https://www.sec.gov/news/studies/2012/929y-study-cross-border-private-rights.pdf. Some of those private actions use Form 13F data in their
calculations to produce a more reliable, `lower bound' estimate of
damages. See Marcia Mayer, Best-Fit Estimation Of Damaged Volume in
Shareholder Class Actions: The Multi-Sector, Multi-Trader Model of
Investor Behavior, Nat'l Economic Research Assoc. (Oct. 2006);
Daniel Fishel et al., The Use of Trading Models to Estimate
Aggregate Damages in Securities Fraud Litigation: An Update, 10(3)
Briefly (Washington, D.C.) 1 (2006). As a result, a reduction in
publicly available Form 13F data may result in increased use of
other methods to estimate shareholder harm.
    \52\ See generally Edward Pekarek, Hogging the Hedge?
``Bulldog's'' 13F Theory May Not be So Lucky, 12 Fordham J. Corp. &
Fin. Law 1079 (2007) (``Pekarek'').
---------------------------------------------------------------------------

    We recognize that raising the Form 13F reporting threshold would
decrease holdings data available to the Commission and other regulators
as well as corporate issuers, market participants, and other analysts
and researchers pursuant to section 13(f).\53\ Although we believe the
proposal would retain disclosure of 90.8 percent of the dollar value of
the Form 13F holdings data, some of the holdings data that would no
longer be reported by managers with less than $3.5 billion in section
13(f) securities relates to smaller portfolio companies in which some
commenters assert larger managers may be less likely to invest.\54\ We
estimate that, under the proposal, holdings data for approximately 95.7
percent of portfolio companies that are currently reported by more than
one manager on Form 13F would continue to be reported on the form.\55\
Whether any of these Form 13F data users find the data from smaller
managers to be valuable would depend on their particular use of this
data.\56\ We believe that the investing public specifically would be
less concerned about the availability of portfolio holdings of these
smaller managers because the activities of these smaller managers are
not likely to cause market effects of the type contemplated by section
13(f).\57\
---------------------------------------------------------------------------

    \53\ See infra footnote 58 and accompanying text.
    \54\ See e.g., Blume and Keim supra footnote 33 at 16 (providing
evidence that portfolios of smaller institutional investors are
weighted more heavily towards smaller stocks compared to portfolios
of larger institutional investors, but noting that both large and
small institutional investors overweight investments in smaller
stocks relative to market weights).
    \55\ We believe that data regarding portfolio companies held by
just a single manager would generally be of limited value to many
users of Form 13F data. This is because a smaller sample size
provides less information about the population and, in particular, a
sample size of one provides no basis for an estimate of variance.
However, if we also counted portfolio companies that are currently
held by just a single manager on Form 13F, together with portfolio
companies that are currently held by more than one manager, we
estimate that, under the proposal, holdings data for approximately
87.2 percent of portfolio companies would continue to be reported.
    \56\ See e.g., Blume and Keim, supra footnote 33 (observing
that, because the $100 million reporting threshold has not changed
over several decades, whereas stock market capitalization has
increased significantly, the holdings of smaller managers make up
only 6.1 percent of the aggregate institutional portfolio in 2010
and do not affect the main results of their analysis about the
trends of institutional ownership).
    \57\ In addition, to the extent that a manager (individually or
collectively with other members of a group) acquires more than 5
percent of any voting class of a company's equity securities
registered under section 12 of the Exchange Act, the manager would
be required to report such an acquisition, along with other
information, on Schedule 13D within 10 days of the purchase.
Depending on the circumstances, the manager may be eligible to file
the more abbreviated Schedule 13G in lieu of filing Schedule 13D.
---------------------------------------------------------------------------

    When examining the effects on data availability of the proposed
amounts, we are mindful of alternative sources of holdings data that
either exist or are being developed and may provide overlapping or
similar data to that included on Form 13F. For example, since the
adoption of section 13(f), the Commission has adopted additional rules
and forms that require investment companies to provide additional
holdings data to the Commission, which would provide the Commission and
the public with certain information about these funds' holdings of
section 13(f) securities and other investments.\58\ As

another example, the Commission adopted a rule to require the self-
regulatory organizations to submit to the Commission a national market
system plan to create, implement and maintain a comprehensive
consolidated audit trail that would allow regulators to track all
activity throughout the U.S. markets in National Market System
securities efficiently and accurately.\59\
---------------------------------------------------------------------------

    \58\ See e.g., Form N-PORT [referenced in 17 CFR 274.150] (This
form requires each registered management investment company to
report on a quarterly basis its monthly holdings information to the
Commission. On a quarterly basis, and with a 60-day delay, holdings
information for the last month of the quarter is made publicly
available). Additionally, developments in the market such as the
increased use of technology to capture current data with respect to
market activity, including more sophisticated systems for following
daily transactions, have reduced the need for the Commission to rely
on Form 13F for purposes of market analysis or surveillance.
    \59\ See Securities Exchange Act Release No. 67457 (July 18,
2012), [77 FR 45722 (August 1, 2012)].
---------------------------------------------------------------------------

    The 1975 Amendments Senate Report noted that Congress was concerned
with the material increase in the concentration of institutional
ownership of securities with managers and the effect of such an
increase on the trade prices of those securities, the issuers of the
securities, as well as on the interests of individual investors.\60\
Congress adopted section 13(f), in part, because it was concerned that
this increase in concentration, coupled with the lack of trading data
of larger managers available to regulators and the market, hampered the
Commission's ability to maintain fair and orderly securities markets
and impaired the stability of stock prices.\61\ We believe that it is
necessary to continue to provide regulators and the public information
regarding the equities holdings of larger managers that have the
potential to significantly affect the securities markets. The need for
public disclosure of holdings of smaller managers is less compelling.
Raising the reporting threshold to $3.5 billion is designed to
recalibrate the reporting threshold to reflect the multiple objectives
of section 13(f). These include providing the Commission, other
regulators and the public with holdings information of larger managers
that may impact the markets without requiring smaller managers to incur
the costs associated with filing reports on Form 13F and subjecting
them to the risks of potentially harmful investment behaviors resulting
from those filing obligations. We believe that the proposed $3.5
billion reporting threshold recalibrates the reporting threshold
appropriately so that it does not impose undue burdens, including
because the dollar value of the aggregate holdings of the smaller
managers that would no longer be required to file reports on Form 13F
under the proposal represent a small percentage of 13(f) securities
overall.
---------------------------------------------------------------------------

    \60\ See 1975 Amendments Senate Report, supra footnote 13 at 82.
    \61\ Id.
---------------------------------------------------------------------------

    We request comment on the proposed amendments to rule 13f-1 and
Form 13F to adjust the reporting threshold.
    1. Should we, as proposed, adopt an amendment to rule 13f-1 that
would initially adjust the reporting threshold under rule 13f-1? Is the
proposed threshold of $3.5 billion appropriate? If another threshold
would be more appropriate, what should the threshold be and why?
    2. Would raising the reporting threshold for Form 13F to $3.5
billion negatively affect the utility of Form 13(f) data or investor
confidence in the integrity of the U.S. markets? If so, how? And if so,
is there a different threshold that would be more appropriate? Are
there any additional effects of raising the Form 13F reporting
threshold that we have not considered?
    3. Should we, as proposed, adopt an amendment to rule 13f-1 that
would initially adjust the Form 13F reporting threshold based on the
growth in the U.S. equities market? Should we, as described above, use
the Federal Reserve Board's flow of funds data on corporate equities as
a basis for this calculation?
    4. Rather than adjusting the Form 13F reporting threshold based on
the growth in the U.S. equities market that occurred between 1975 and
December 2018 (a date certain), should we instead use an average rate
of growth, which might effectively reflect market growth while
minimizing the effects of market fluctuations around the time the
Commission is adjusting the threshold? For example, under this
approach, we could take the market size as of the end of 2015, 2016,
2017, 2018, and 2019, average those values, and compare that average to
the size of the U.S. equities market in 1975. If so, why? Is such a
five-year period (or other period) more appropriate for calculating an
average growth rate to apply over the 45 years since the threshold was
initially set?
    5. Should we instead adjust the reporting threshold for Form 13F
using stock market returns as a basis for this calculation? If so, how
should we measure stock market returns? For example, would dividends be
included or excluded? Is there another measure that we should use as a
basis for initially adjusting the reporting threshold?
    6. Should we instead adjust the reporting threshold for Form 13F to
account for consumer price inflation? If so, what measure of consumer
price inflation--PCE or CPI--should we use? Is there another measure of
consumer price inflation (or other inflation measure) that we should
use? If so, what?
    7. Should we adopt a different rounding convention, rather than the
nearest $500 million, such as the nearest $1 billion, $250 million, or
$100 million? For example, if we rounded to the nearest $100 million,
the reporting threshold would be $3.6 billion based on stock market
growth. If we should use a different rounding convention, why?
    8. Are the Form 13F filing obligations burdensome to smaller
managers? If so, how? Are they burdensome in absolute terms, relative
terms, or both? Are the burdens on smaller managers different in
character from the burdens on larger managers?
    9. What, if any, are the benefits to investors and markets for the
markets to have access to Form 13F data from smaller managers? Do these
benefits justify the filing burdens? If so, why?
    10. Are the Form 13F filing obligations burdensome to larger
managers? If so, how? Is it beneficial to the markets to continue to
have access to Form 13F data from larger managers? If so, why? Do these
benefits justify the filing burdens? If so, why?
    11. Who uses Form 13F data? Are these uses beneficial to investors,
market integrity, or capital formation? Why or why not? How will these
users of the data be affected if the reporting threshold is increased
and fewer filers report? Do those users prefer a different threshold?
Why or why not? Can those users reasonably find alternative sources of
data that meet their needs? Why or why not?
    12. We estimate above direct compliance costs that smaller managers
incur in connection with Form 13F. Are these estimates accurate? What
kinds of costs, and in what amounts, do smaller managers incur in
connection with Form 13F? How do the costs differ for larger and
smaller managers? How much internal time do managers devote to
compliance with Form 13F? What are the external costs, such as the cost
of a third-party vendor or external legal counsel, associated with
complying with Form 13F? We request comment on the direct compliance
costs managers experience in connection with Form 13F, including the
estimates in Section III below, and how these costs vary among
managers.
    13. We also request comment on indirect costs that may be incurred
in connection with Form 13F. We discuss above some of these indirect
costs, such as the potential for front-running and copycatting. Do
commenters agree that these indirect costs are incurred? How

do these indirect costs differ for larger and smaller managers? Are
there other or different indirect costs that are incurred in connection
with Form 13F? What are those and how would they be affected by the
proposed amendments?

B. Future Analysis

    We are proposing an increase in the reporting threshold of Form 13F
to account for the change in size and structure of the U.S. equities
market since 1975. However, we recognize that, as the U.S. equities
market continues to change in the future, Form 13F's reporting
threshold, once again, may become significantly misaligned with the
size and structure of the market and, as a result, place unnecessary
reporting burdens on certain managers. Therefore, the staff will
conduct reviews of the Form 13F reporting threshold every five years to
determine whether the reporting threshold continues to be appropriate.
If, as a result of such a review, the staff believes that additional
adjustments should be made to the Form 13F reporting threshold, the
staff will recommend an appropriate adjustment to the Commission.
    As an alternative, we considered proposing to amend rule 13f-1 to
provide that the Commission would make automatic future adjustments to
the Form 13F reporting threshold on an ongoing basis every five years
to keep the reporting threshold aligned with the size and structure of
the market.\62\ For example, we considered proposing that these
automatic adjustments take into account the growth in the U.S. equities
market. However, we are concerned that adjusting the Form 13F reporting
threshold to account for the growth in U.S. equities market for
regularly recurring, automatic, and ongoing adjustments could cause
volatile changes in the reporting threshold. Alternatively, we
considered using inflation indexes, such as the PCE or CPI, to make
automatic adjustments to the Form 13F reporting threshold. While these
measures would result in less volatile changes to the 13F reporting
threshold, we are concerned that the growth in the size of the market
may outpace inflation over time. This would cause the 13F reporting
threshold to burden smaller managers unnecessarily.
---------------------------------------------------------------------------

    \62\ Such a requirement would be similar to other automatic
periodic adjustments that the Commission makes. For example, 17 CFR
275.205-3 [rule 205-3 under the Investment Advisers Act of 1940
(``Advisers Act'')] provides that the Commission will issue an order
every five years to adjust the dollar amounts in that rule for the
effects of inflation.
---------------------------------------------------------------------------

    Based on these considerations, we determined not to propose
automatic future adjustments to the reporting threshold. The staff's
periodic review of the Form 13F reporting threshold and any resulting
staff recommendation would inform the Commission's consideration of
whether to propose additional changes to the threshold in the future.
Addressing any future change to the reporting threshold in notice and
comment rulemaking, as opposed to an automatic adjustment required by
an order, would allow the Commission to actively consider and receive
public comment on the effects of any future adjustments to the
reporting threshold, including the effects on the mix of information
available to the market and the reporting burdens associated with
filing Form 13F reports. We request comment on the following:
    14. Rather than the staff conducting periodic reviews of the Form
13F reporting threshold, should we instead adopt a periodic automatic
adjustment to the Form 13F reporting threshold? If so, how often should
the reporting threshold be automatically adjusted? If we adopt an
automatic adjustment, what measure should we use to make the
adjustment? Should we use consumer price inflation measures such as the
CPI or PCE? Should we use stock market growth or stock market returns
instead? Is there a different measure that would be more appropriate?
If so, please explain why. If we use any of these measures, how should
they be measured and as of what date? If we use an adjustment based on
stock market growth or returns, the adjustment could be positive or
negative compared with the present level. Would such an automatic
adjustment raise any additional issues that the Commission should take
into account in considering such an automatic adjustment?

C. Omission Threshold for Form 13F

    Form 13F allows, but does not require, a manager to omit holdings
of fewer than 10,000 shares (or less than $200,000 principal amount of
convertible debt securities) (``share limit'') and less than $200,000
aggregate fair market value (``value limit'') (together, with the share
limit, ``omission threshold'').\63\ The omission threshold was intended
to further the Commission's goals of structuring Form 13F in a manner
that would provide meaningful holdings data while minimizing the form's
reporting burdens.\64\ The Commission included the omission threshold
when it first adopted Form 13F because it viewed aggregate holdings in
these amounts as de minimis and, therefore, unlikely to have the
potential to materially impact the market.\65\
---------------------------------------------------------------------------

    \63\ See Special Instruction 10 of Form 13F.
    \64\ See supra footnote 17 and accompanying text.
    \65\ See 13F Adopting Release, supra footnote 10 at n.12 and
accompanying text.
---------------------------------------------------------------------------

    In conjunction with the proposal to increase the reporting
threshold, we are proposing to eliminate the omission threshold for
Form 13F. We believe that, if the reporting threshold is substantially
increased, the omission threshold would no longer be necessary or
appropriate. We have proposed a significant increase in the reporting
threshold for Form 13F to $3.5 billion and, as a result, reporting all
of a manager's holdings would be less burdensome to managers of that
size. For these larger managers, we believe that the incremental
increase in cost, if any, of including securities holdings information
below the omission threshold on Form 13F would be immaterial, including
because larger managers are more likely to have trading and other
systems that can export all of the manager's positions (regardless of
size) for purposes of reporting on Form 13F. Eliminating the omission
threshold therefore may not materially increase burdens for these
filers. Although we do not have data on the extent to which managers
currently utilize the omission threshold, our staff has examined
current filings on Form 13F by managers reporting more than $3.5
billion in holdings and found that a number of these managers currently
report holdings that fall below the omission threshold.\66\ These
managers choose not to omit certain holdings even where Form 13F would
permit them to do so. Should a manager determine that disclosure of a
smaller holding may cause harm and qualify for confidential treatment,
we believe that managers with at least $3.5 billion under management
would be able to seek appropriate protection by filing Form 13F CTR.
---------------------------------------------------------------------------

    \66\ In December 2018, we estimate that 1,162 managers, or 23.1
percent, voluntarily reported at least some positions that fell
within the omission threshold. Additionally, approximately 212
managers (or 38.27 percent) who had at least $3.5 billion in assets
under management voluntarily reported positions that fell below the
omission threshold.
---------------------------------------------------------------------------

    Rather than eliminate the omission threshold entirely, as proposed,
we considered adjusting it, including adjusting it upwards to account
for market growth, akin to the adjustment we are proposing to the
reporting threshold (e.g., increasing the share limit to 50,000 and the
value limit to $1,000,000 \67\). We are not taking this or

a similar approach because, as discussed, we believe that the
incremental increase in cost, if any, of including securities holdings
information below the current omission threshold--or any revised
threshold--is likely immaterial.
---------------------------------------------------------------------------

    \67\ Based on the staff's review of data reported on Form 13F,
increasing the share and value limits in this way would result in
25.83 percent of the number of holdings qualifying for omission on
Form 13F and a decrease in the value of the reported securities of
0.22 percent.
---------------------------------------------------------------------------

    We seek comment on our proposal to eliminate the omission
threshold, including the following issues:
    15. Should we, as proposed, eliminate the omission threshold? Why
or why not?
    16. If the Form 13F reporting threshold is raised to $3.5 billion
as proposed, to the extent it is not already reported on a voluntary
basis, would investors and the markets find the disclosure of smaller
holdings information for larger managers valuable? Why or why not?
    17. Among Form 13F filers with at least $3.5 billion of 13(f)
securities under management, is it costly to report small positions?
Why or why not? How many of these filers' positions have fewer than
10,000 shares? How many of their positions are valued under $200,000?
What is the incremental cost of reporting these small positions on Form
13F? Is the incremental cost significant? Are there other costs
associated with identifying these specific positions for purposes of
excluding them? Are there other reasons that it would be beneficial to
keep the omission threshold?
    18. Rather than eliminating the omission threshold, should we
increase it? If so, what part should we increase? Should we adjust only
the share limit of the omission threshold? If so, to what? Should we
adjust only the value limit of the omission threshold? If so, to what?
Should we adjust both components of the omission threshold? If so, to
what? Should we, for example, increase the share limit to 50,000 and
the value limit to $1,000,000?
    19. Should we mirror the adjustment to the omission threshold
proportionately to the adjustment we are proposing for the Form 13F
reporting threshold using stock market growth? Would such an adjustment
result in a significant decrease in securities reported on Form 13F?
Would such an adjustment impede the ability of the public to observe
the impact managers have on the markets?
    20. If we maintain an omission threshold, should we adopt a
mechanism for automatic future adjustments of the omission threshold?
Should future adjustments be for the share limit, for the value limit,
or for both? What is an appropriate mechanism for adjusting the share
limit?

D. Additional Identifying Information

    We are proposing to amend Form 13F to require filers to provide
additional identifying information. The proposed amendments would
require each Form 13F filer to provide its CRD number and SEC filing
number, if any.\68\ If a manager is making a Form 13F-NT filing, the
manager must include the CRD number and SEC filing number, if any, of
any other manager included in the ``List of Other Managers Reporting
for this Manager'' table on the cover page.\69\
---------------------------------------------------------------------------

    \68\ See proposed amendments to Special Instruction 5 of Form
13F.
    \69\ A manager can make a Form 13F-NT filing if all the
securities for which the manager has investment discretion are
reported by another manager. See Special Instruction 6 of Form 13F.
Similarly, if a manager's Form 13F-HR reports the holdings of
managers other than the reporting manager, the reporting manager
would be required to include the CRD number and SEC filing number of
those other managers in the ``List of Other Included Managers'' on
the cover page. See Special Instruction 8 of Form 13F.
---------------------------------------------------------------------------

    We believe that this information would allow the Commission and
other consumers of Form 13F data to identify a Form 13F filer's other
regulatory filings and the interrelationships between managers who
share investment discretion over 13(f) securities more easily. This
could identify for the public additional sources of market
information.\70\ We estimate that each manager will initially spend six
hours per year implementing these changes.\71\ Therefore, we estimate
that these amendments will initially impose $1,164,798 of costs on all
managers who would be required to file Form 13F under the proposed
reporting threshold.\72\ We believe that the estimated additional costs
of requiring this disclosure would be justified by informational
efficiencies and benefits.\73\
---------------------------------------------------------------------------

    \70\ See section 13(f)(4) of the Exchange Act [15 U.S.C.
78m(f)(4)] (requiring the Commission to tabulate information
contained in Form 13F reports in a manner that would ``maximize the
usefulness of the information to other Federal and State authorities
and the public''). The ability to identify interrelationships
between managers easily could also allow third party vendors that
compile Form 13F data to provide more complete trading information.
See Pekarek, supra footnote 52, at n.91 (noting that most academic
studies rely on 13F filings compiled quarterly by third party
vendors).
    \71\ See Section III below for a discussion of estimated burdens
associated with Form 13F under the Paperwork Reduction Act.
    \72\ Id.
    \73\ Other regulatory filings also require similar identifying
information. See e.g., Form N-CEN [referenced in 17 CFR 274.101];
Form ADV [referenced in 17 CFR 279.1].
---------------------------------------------------------------------------

    We seek comment on the following issues:
    21. Should we require managers to provide their CRD number and SEC
filing number, if any, on Form 13F?
    22. Should we require managers to provide the CRD number and SEC
filing number, if any, of other managers identified in their 13F
report?
    23. Would this additional identifying on Form 13F be useful
information? If so, how?
    24. Would disclosing this information be unduly burdensome for 13F
filers?
    25. Are there any other amendments we should make to the
information provided on Form 13F? For example, is there any information
currently required that is not useful or does not have a beneficial
effect for investors, reporting managers, or users of the data? Should
we consider omitting Form 13F's requirement to provide a CUSIP number
for each security? Why or why not? Should we permit managers to
provide, in lieu of a CUSIP number, other identifiers such as a
Financial Instrument Global Identifier (FIGI) for each security? Why or
why not? Would permitting voluntary use of an alternate identifier have
a beneficial effect for investors, reporting managers, or users of the
data?

E. Technical Amendments

    We are proposing to make certain nonsubstantive technical
amendments to Form 13F designed to account for the previous change in
the format of Form 13F from the plain-text ASCII format to the
structured XML data format. For example, we are proposing to simplify
the rounding conventions of Form 13F by requiring all dollar values
listed on Form 13F to be rounded to the nearest dollar, rather than to
the nearest one thousand dollars as is currently required.\74\ We are
also proposing to remove the requirement that filers, when reporting
dollar values on Form 13F, omit the ``000''.\75\ As a space saving
measure, current Form 13F instructs filers to omit the ``000'' and
thus, for example, report a security with a value of $5 million as
$5,000. As proposed, such a filer would report the security's value as
$5,000,000. Since column width is no longer an issue with the
structured XML data format, we believe that this change will reduce
filer mistakes and data inaccuracies.\76\ For

similar reasons, we also are proposing to remove the 80 character limit
imposed on the information filers can include on the cover page and the
summary page and the 132 character limit on the information table.\77\
We believe that these amendments would enhance the accuracy of the data
provided on Form 13F and make it easier to understand and use.
Additionally we are proposing to remove duplicative definitions and
streamline certain sections to simplify Form 13F's instructions.\78\ We
estimate that each manager will initially spend 10 hours per year
implementing these changes.\79\ Therefore, these amendments would
impose $1,417,350 of costs on all managers who would be required to
file Form 13F under the proposed reporting threshold.\80\
---------------------------------------------------------------------------

    \74\ See proposed amendments to Special Instruction 9 of Form
13F.
    \75\ Id.
    \76\ See Anne Anderson & Paul Brockman, An Examination of 13F
Filings, 41 J. Fin. Res. 295, 312-314 (2018) (the authors analyzed
the accuracy of Form 13F data and concluded that mistakes in
applying Form 13F's rounding guidelines leads to many discrepancies
in the reported values on Form 13F).
    \77\ These character limits are imposed by 17 CFR 232.305 [rule
305 of Regulation S-T].
    \78\ See proposed amendments to General Instructions 1 and 3
well as Special Instructions 3, 7, 8, and 13 of Form 13F. We are
also proposing to streamline the discussion in the Paperwork
Reduction Act Section of Form 13F.
    \79\ See Section III below for a discussion of estimated burdens
associated with Form 13F under the Paperwork Reduction Act.
    \80\ Id.
---------------------------------------------------------------------------

    We request comment on our proposed technical amendments, and the
following issues:
    26. Should we require filers to round all dollar values listed on
Form 13F to the nearest dollar and remove the requirement to omit
``000''? Should we, alternatively, maintain the current rounding
conventions? Should we adopt some other rounding conventions? Should we
no longer permit rounding?
    27. Are there any other amendments we should make to streamline
Form 13F or simplify its instructions? If so, what are they?
    28. Will our proposed technical amendments increase the accuracy of
Form 13F data?
    29. Will our proposed technical amendments make Form 13F data
easier to understand and more accessible to the public?
    30. Would these proposed technical amendments impose costs or
burdens on filers?
    We are also proposing to amend the instructions on the Form 13F for
confidential treatment requests to require managers seeking
confidential treatment for information contained in Form 13F to
demonstrate that the information is both customarily and actually kept
private by the manager, and to show how the release of this information
could cause harm to the manager.\81\ We believe the proposed amendment
is necessary in light of a U.S. Supreme Court decision in June 2019
that changed the standard for determining whether information is
``confidential'' under exemption 4 of the Freedom of Information Act
(``FOIA'').\82\ Our proposed amendment is necessary because a FOIA
analysis is part of a Form 13F CTR determination. Section 13(f)(4) of
the Exchange Act authorizes the Commission, as it determines to be
necessary or appropriate in the public interest or for the protection
of investors, to delay or prevent public disclosure of certain Form 13F
information in accordance with the FOIA. Additionally, Section 13(f)(5)
of the Exchange Act requires that the Commission, in exercising its
authority under section 13(f), ``determine (and so state) that its
action is necessary or appropriate in the public interest and for the
protection of investors or to maintain fair and orderly markets.'' We
seek comment on our proposed modified standard for Form 13F CTRs, and
the following issue:
---------------------------------------------------------------------------

    \81\ See proposed amendments to Instruction 2.d for Confidential
Treatment Requests of Form 13F.
    \82\ 5 U.S.C. 552(b)(4). See Food Marketing Institute v. Argus
Leader Media, 139 S. Ct. 2356 (2019) (stating that ``[a]t least
where commercial or financial information is both customarily and
actually treated as private by its owner and provided to the
government under an assurance of privacy, the information is
`confidential' within the meaning of Exemption 4'').
---------------------------------------------------------------------------

    31. Does the amendment appropriately reflect the effect of the U.S.
Supreme Court's June 24, 2019, decision in Food Marketing Institute v.
Argus Leader Media on the type of information that is required to
substantiate confidential treatment in accordance with Exchange Act
sections 13(f)(4) and (5) and rule 24b-2 thereunder?
    Finally, we are proposing technical amendments to Form 13F's
instructions for confidential treatment requests to reflect amendments
to the Commission's FOIA regulations that were amended in 2018.\83\
---------------------------------------------------------------------------

    \83\ Proposed amendments to Instructions for Confidential
Treatment Requests of Form 13F. See Amendments to the Commission's
Freedom of Information Act Regulations, Exchange Act Release No.
83506 (June 25, 2018) [83 FR 30322] (June 28, 2018).
---------------------------------------------------------------------------

F. Efficiency, Competition, and Capital Formation

    We are sensitive to the costs and benefits of the rules we are
proposing, and section 23(a)(2) of the Exchange Act requires us to
consider, among other matters, the impact that any new rule would have
on competition and states that the Commission shall not adopt any rule
that would impose a burden on competition not necessary or appropriate
in furtherance of the purposes of the Exchange Act. In addition,
section 3(f) of the Exchange Act directs us, when engaging in
rulemaking that requires us to consider or determine whether an action
is necessary or appropriate in the public interest, to consider, in
addition to the protection of investors, whether the action will
promote efficiency, competition, and capital formation. The impacts of
the proposed amendments on efficiency, competition, and capital
formation are discussed throughout this section and elsewhere in this
release. The following discussion highlights several such impacts.
    The Commission believes that, for smaller managers, the proposed
Form 13F reporting threshold increase is likely not only to enhance
competition by lowering the cost to participate in the market but also
to promote efficiency, which can benefit investors in the form of lower
management fees and/or enhanced services. Furthermore, because the
proposed Form 13F reporting threshold increase would potentially reduce
the exposure of smaller managers to harmful, and in many cases
inappropriate, actions by other market participants, such as front
running, smaller managers would likely be encouraged to invest in small
and mid-size portfolio companies that are more susceptible to the
harmful effects of these behaviors.\84\ This increased investment would
facilitate capital formation in smaller and medium sized companies.
Similarly, protecting smaller managers from these harmful behaviors
would likely promote competition between smaller and larger managers by
helping to level the playing field for smaller managers. Investors
would similarly benefit from the price impacts of this competition as
well as any reduction in harmful trading behaviors.
---------------------------------------------------------------------------

    \84\ See supra footnote 34.
---------------------------------------------------------------------------

    The Commission also believes that the proposed increase in the Form
13F reporting threshold would enhance efficiency by reducing the
reporting burden of Form 13F which would enable smaller managers to
devote more resources to, for example, market research that might
promote price discovery. Similarly, the Commission believes that the
proposed technical amendments would increase efficiency by enhancing
the accuracy of the data provided on Form 13F and thus improving the
data's usefulness. Furthermore, by requiring managers to provide
additional identifying information, and identifying information of
other managers covered

by the report, these proposed amendments would enhance efficiency by
making it easier for regulators and the public to identify a Form 13F
filer's other regulatory filings and the interrelationships between
managers who share investment discretion over 13(f) securities.
    This rulemaking also would remove the omission threshold for Form
13F filers. The Commission believes that this will have only negligible
effects on efficiency, competition, and capital formations because, on
the one hand, the additional immaterial information is not likely to be
of significant value, and on the other hand, the costs of reporting
these small positions is de minimis for filers with at least $3.5
billion of 13(f) securities. Further, to the extent an asymmetry in
reporting could occur between larger and smaller managers with respect
to holdings in small and medium sized companies, if a larger manager
were to determine that disclosure of a small holding may negatively
affect its competitive position, we believe that a larger manager would
be able to seek appropriate protection without undue burden by filing a
Form 13F CTR.
    We request comment on all aspects of our analysis, including the
potential benefits and costs of the proposed amendments, and whether
the proposed amendments, if adopted, would promote efficiency,
competition, and capital formation or have an impact on investor
protection. Commenters are requested to provide empirical data,
estimation methodologies, and other factual support for their views, in
particular, on the estimates of costs and benefits for the affected
parties.
    32. Would relieving smaller managers from the compliance burdens of
Form 13F reduce costs and enhance competition and add efficiency,
including enhancing the ability of smaller managers to compete in the
market? To what extent, if any, would the benefits be passed on to
investors in the form of lower management fees and/or enhanced
services? Would the proposed increase in the Form 13F threshold protect
smaller managers from harmful behaviors such as front-running? Would
reducing this risk for smaller managers promote capital formation by
encouraging these managers to invest more in small and mid-size
portfolio companies? Would reducing this risk for smaller managers
benefit investors?
    33. Would the proposed technical amendments increase efficiency by
enhancing the accuracy of Form 13F data? Are the cost estimates
appropriate?
    34. Would the proposed additional identifying information increase
efficiency by making it easier to identify a Form 13F filer's other
regulatory filings and the interrelationships between managers who
share investment discretion over 13(f) securities?

III. Paperwork Reduction Act Analysis

    Certain provisions of the proposed amendments to Form 13F would
affect the ``collection of information'' burden under Form 13F within
the meaning of the Paperwork Reduction Act of 1995 (``PRA'').\85\ We
are submitting the proposed collection of information to the Office of
Management and Budget (``OMB'') for review in accordance with the
PRA.\86\ The title for the existing collection of information is:
``Form 13F, Report of Institutional Investment Managers (Pursuant to
Section 13(f) of the Securities Exchange of 1934)'' (OMB Control No.
3235-0006). An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid OMB control number. The requirements of this
collection of information are mandatory. Responses are not kept
confidential, unless they are confidential pending review pursuant to
rule 24b-2(c) under the Exchange Act or the Commission grants an
application for confidential treatment pursuant to section 13(f)(4) of
the Exchange Act.
---------------------------------------------------------------------------

    \85\ 44 U.S.C. 3501 through 3520.
    \86\ 44 U.S.C. 3507(d); 5 CFR 1320.11.
---------------------------------------------------------------------------

A. Form 13F

    In our most recent PRA submission for Form 13F, we estimated a
total hour burden of 472,521.6 hours, with an internal cost burden of
$31,186,425.60, and with no annual external cost burden.\87\ Based on
staff analysis and outreach to managers, however, we believe that these
estimates do not reflect all of the information collection costs
associated with Form 13F. The current burden estimates for Form 13F
assume that all of the functions are carried out by a compliance clerk,
whereas we understand that additional professionals are typically
involved. The current burden estimates also do not include external
costs for third-party vendors, which we understand many managers use in
connection with their filings on Form 13F, or external legal counsel,
who may provide advice in connection with the form's reporting
requirements or actual or potential requests for confidential
treatment. Furthermore, the current burden estimates assume that the
same number of hours and costs are necessary to prepare and file Form
13F-HR and 13F-NT filings, even though reports on Form 13F-HR would
involve greater burdens. This results in a current overestimation of
the costs associated with filing Form 13F-NT. Therefore, we are
revising the current PRA burdens associated with filing Form 13F.
---------------------------------------------------------------------------

    \87\ This estimate is based on the last time the rule's
information collection was submitted for PRA renewal in 2018.
---------------------------------------------------------------------------

    The table below summarizes our adjustments to the current PRA
estimates and the initial and ongoing annual burden estimates
associated with the proposed amendments to Form 13F. Staff estimates
that the proposed amendments will not change the PRA hour burdens
associated with making amended filings on Form 13F.

                                                             Table 2--Form 13F PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      Initial hours       Annual hours                     Wage rate          Internal time cost     External costs \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        REVISIONS TO CURRENT PRA BURDEN ESTIMATES
                                                           Revised Burdens for 13F-HR Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current estimated annual burden of   ..............  80.8 hours............      x   $66 \2\..............  $5,332.80............
 Form 13F-HR per filer.

Revised current annual estimated     ..............  80.8 hours x 5,089          x   $257.70 (blended rate  $20,822.16 x 5,089     $789 \5\ x 5,089
 burden per filer.                                    filers \3\.                     for compliance         filers.                filers.
Revised current annual burden of                     ......................           attorney, senior      .....................  .....................
 Form 13F-HR filings.                                411,191.2 hours.......           programmer, and       .....................  .....................
                                                                                compliance clerk)     $105,963,972.........  $4,015,221.\6\
                                                                                \4\.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Revised Burdens for 13F-NT Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current estimated annual burden of   ..............  80.8 hours............
 Form 13F-NT.
Revised current estimated Form 13F-  ..............  4 hours x 4 filings...
 NT burden per filing.
Revised current annual burden of     ..............  16 hours x 1,570            x   $71 (wage rate for     $1,136 x 1,570 filers  $300 x 1,570 filers.
 Form 13F-NT per filer.                               filers \7\.                     compliance clerk).
                                                     25,120 hours..........          .....................  $1,783,520...........  $471,000.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Revised Burdens for Form 13F Amendment Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current estimated burden per         ..............  4 hours...............          $66.00...............  $264.................
 amendment filing.
Revised current estimated burden     ..............  4 hours x 1,066             x   $257.70 (blended rate  $1,030.80 x 1,066      $300 x 1,066
 per amendment.                      ..............   amendments.                     for compliance         amendments.            amendments.
Revised current annual estimated     ..............  ......................           attorney, senior      .....................  .....................
 burden of all amendments.           ..............  4,264 hours...........           programmer, and       .....................  $319,800.
                                                                                compliance clerk).    $1,098,832.80........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             PROPOSED AMENDMENTS TO FORM 13F
                                                              Estimated Form 13F-HR Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed Amendments to Form 13F-HR               16  5.8 hours \8\.........      x   $257.70 (blended rate  $1,494.66............  $0.
 (additional identifying             ..............  ......................           for compliance        .....................  .....................
 information, technical amendments,  ..............  ......................           attorney, senior      .....................  .....................
 change in omission threshold) per   ..............  ......................           programmer, and       .....................  .....................
 filer.                              ..............  ......................           compliance clerk)     .....................  .....................
New annual estimated Form 13F-HR     ..............  ......................           \9\.                  .....................  .....................
 burden per filer.                   ..............  ......................                                 .....................  .....................
                                     ..............  ......................                                 .....................  .....................
                                     ..............  86.6 hours............                                 $22,316.82...........  $789.
Number of annual filers............  ..............  x 550 filers \10\.....                                 x 550 filers.........  x 550 filers.
    Total new annual burden........  ..............  47,630 hours..........                                 $12,274,251..........  $433,950.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Estimated Form 13F-NT Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed Amendments to Form 13F-NT                6  2.5 hours \8\.........      x   71.00 (wage rate for   $177.50..............  $0.
 (additional identifying                                                              compliance clerk)
 information).                                                                        \11\.
New annual estimated Form 13F-NT     ..............  18.5 hours x 738                                       $1,313.50 x 738        $300 x 738 filers.
 burden per filer.                                    filers \12\.                                           filers.
Number of annual filers............
    Total new annual burden........  ..............  13,653 hours..........                                 $969,363.............  $221,400.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Estimated Amendment Filings Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
Revised estimated number of          ..............  344 amendments \13\ x           .....................  .....................  $300 x 344
 Amendments.                                          4 hours.                                                                      amendments.
Estimated total burden of            ..............  1,376 hours...........      x   $257.70 (blended rate  $354,595.2...........  $103,200.
 amendments.                                                                          for compliance
                                                                                attorney, senior
                                                                                programmer, and
                                                                                compliance clerk).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             TOTAL ESTIMATED FORM 13F BURDEN
--------------------------------------------------------------------------------------------------------------------------------------------------------
Currently approved burden estimates              472,521.6 hours                     .....................  $31,186,425.60.......  $0.
Revised current burden estimates...              440,575.2 hours                     .....................  $108,846,325.........  $4,806,021.

Burden estimates under the proposal               62,659 hours                       .....................  $13,598,209.2........  $758,550.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ The external costs of complying with Form 13F can vary among filers. Some filers use third-party vendors for a range of services in connection with
  filing reports on Form 13F, while other filers use vendors for more limited purposes such as providing more user-friendly versions of the list of
  section 13(f) securities. For purposes of the PRA, we estimate that each filer will spend an average of $300 on vendor services each year in
  connection with the filer's four quarterly reports on Form 13F-HR or Form 13F-NT, as applicable, in addition to the estimated vendor costs associated
  with any amendments. In addition, some filers engage outside legal services in connection with the preparation of requests for confidential treatment
  or analyses regarding possible requests, or in connection with the form's disclosure requirements. For purposes of the PRA, we estimate that each
  manager filing reports on Form 13F-HR will incur $489 for one hour of outside legal services each year.
\2\ $66 was the estimated wage rate for a compliance clerk in 2018.
\3\ This estimate is based on the number of 13F-HR filers as of December 2018.
\4\ The $257.7 wage rate reflects current estimates of the blended hourly rate for an in-house compliance attorney ($368), a senior programmer ($334)
  and in-house compliance clerk ($71). $257.7 is based on the following calculation: ($368 + $334 + $71)/3 = $257.7. The $368 per hour and $334 per hour
  figures for a compliance attorney and a senior programmer, respectively, are based on salary information for the securities industry compiled by the
  Securities Industry and Financial Markets Association's Office Salaries in the Securities Industry 2013 (``SIFMA Report''), modified by Commission
  staff to account for an 1800-hour work-year and inflation, and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead.
  The $71 per hour figure for a compliance clerk is based on salary information from the SIFMA Report, modified by Commission staff to account for an
  1800-hour work-year and inflation, and multiplied by 2.93 to account for bonuses, firm size, employee benefits and overhead.
\5\ $789 includes an estimated $300 paid to a third-party vendor in connection with the Form 13F-HR filing as well as an estimated $489 for one hour of
  outside legal services.
\6\ We estimate that Form 13F-HR filers will require some level of external legal counsel in connection with these filings.
\7\ This estimate is based on the number of Form 13F-NT filers as of December 2018.
\8\ Includes initial burden estimates annualized over a three-year period, plus 0.5 hours of ongoing annual burden hours.
\9\ These PRA estimates assume that the same types of professionals would be involved in satisfying the proposed amendments that we believe otherwise
  would be involved in preparing and filing reports on Form 13F-HR.
\10\ This estimate is based on the Form 13F-HR filers as of December 2018 that would continue to be required to file Form 13F under the proposed $3.5
  billion reporting threshold.
\11\ These PRA estimates assume that the same types of professionals would be involved in satisfying the proposed amendments that we believe otherwise
  would be involved in preparing and filing reports on Form 13F-NT.
\12\ This estimate is based on the number of Form 13F-NT filers as of December 2018, and assumes that a Form 13F-NT filing linked to a Form 13F-HR
  filing of a manager that exceeds the $3.5 billion threshold would continue to be filed.
\13\ We estimate that 86 filers would file amendments to Form 13F if the $3.5 billion reporting threshold is adopted. 86 amendments x 4 annual filings =
  344 amendments.

B. Request for Comments

    We request comment on whether these estimates are reasonable.
Specifically, we request comment on whether our estimated average costs
are reasonable in light of the proposed increase in the Form 13F
reporting threshold. The proposal would limit the form's reporting
obligations to larger managers, while the average burden estimate of
86.6 hours represents the average burden of complying with Form 13F
across all current filers. Furthermore, the proposal assumes that a
compliance attorney, a senior programmer, and a compliance clerk would
be equally involved in fulfilling a manager's compliance burdens
associated with Form 13F. We request comment on these assumptions,
recognizing that there will be some variation among different managers.
Additionally, we seek comment on our estimated external costs of
complying with Form 13F-HR and any amendments and Form 13F-NT.
    Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits
comments in order to: (1) Evaluate whether the proposed collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information will have practical
utility; (2) evaluate the accuracy of the Commission's estimate of the
burden of the proposed collection of information; (3) determine whether
there are ways to enhance the quality, utility, and clarity of the
information to be collected; and (4) determine whether there are ways
to minimize the burden of the collection of information on those who
are to respond, including through the use of automated collection
techniques or other forms of information technology.
    Persons wishing to submit comments on the collection of information
requirements of the proposed amendments should direct them to the OMB
Desk Officer for the Securities and Exchange Commission,
<EMAIL_ADDRESS>and should send a copy to,
Vanessa A. Countryman, Secretary, Securities and Exchange Commission,
100 F Street NE, Washington, DC 20549-1090, with reference to File No.
S7-08-20. OMB is required to make a decision concerning the collections
of information between 30 and 60 days after publication of this
release; therefore a comment to OMB is best assured of having its full
effect if OMB receives it within 30 days after publication of this
release. Requests for materials submitted to OMB by the Commission with
regard to these collections of information should be in writing, refer
to File No. S7-08-20, and be submitted to the Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736.

IV. Initial Regulatory Flexibility Analysis

    Pursuant to Section 605(b) of the Regulatory Flexibility Act
(``RFA''),\88\ the Commission hereby certifies that the proposed
amendments to rule 13f-1 and Form 13F under the Exchange Act, relating
to increasing the reporting threshold for Form 13F from $100 million to
$3.5 billion, along with certain technical amendments, would not, if
adopted, have a significant economic impact on a substantial number of
small entities. The definition of the term ``small entity'' in the
Exchange Act does not explicitly reference institutional investment
managers.\89\ However, rule 0-10 provides that the Commission may
``otherwise define'' small entities for purposes of a particular
rulemaking proceeding. For purposes of the proposed amendments relating
to the reporting threshold of Form 13F, the Commission has determined
to use the definition of small entity under 17 CFR 275.0-7(a) as more
appropriate to the functions of managers. The Commission believes that
the proposed definition would help ensure that all persons or entities
that might be institutional investment managers under section 13(f) of
the Exchange Act will be included within a category addressed by the
definition. Therefore, for purposes of

this rulemaking and the RFA, a manager is a small entity if it: (i) Has
assets under management having a total value of less than $25 million;
(ii) did not have total assets of $5 million or more on the last day of
its most recent fiscal year; and (iii) does not control, is not
controlled by, and is not under common control with another investment
adviser that has assets under management of $25 million or more, or any
person (other than a natural person) that had total assets of $5
million or more on the last day of its most recent fiscal year.\90\ The
Commission requests comments on the use of this definition.
---------------------------------------------------------------------------

    \88\ 5 U.S.C. 605(b).
    \89\ 17 CFR 240.0-10 (``rule 0-10'').
    \90\ 17 CFR 275.0-7(a) (``rule 0-7(a)''). Recognizing the growth
in assets under management at investment advisers since rule 0-7(a)
was adopted, the Commission plans to revisit the definition of a
small entity in rule 0-7(a).
---------------------------------------------------------------------------

    Managers are not required to submit reports on Form 13F unless they
exercise investment discretion with respect to accounts holding 13(f)
securities having an aggregate fair market value on the last trading
day of any month of any calendar year of at least $100 million.
Therefore, no small entities for purposes of rule 0-10 under the
Exchange Act are affected by the form or by an increase to the
reporting threshold. The Commission requests written comments regarding
these certifications. The Commission requests that commenters describe
the nature of any impact on small businesses and provide empirical data
to support the extent of the impact.

V. Consideration of the Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996 (``SBREFA''),\91\ we must advise OMB whether a proposed
regulation constitutes a ``major'' rule. Under SBREFA, a rule is
considered ``major'' where, if adopted, it results in or is likely to
result in (1) an annual effect on the economy of $100 million or more;
(2) a major increase in costs or prices for consumers or individual
industries; or (3) significant adverse effects on competition,
investment or innovation.
---------------------------------------------------------------------------

    \91\ Public Law 104-121, Title II, 110 Stat. 857 (1996)
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note
to 5 U.S.C. 601).
---------------------------------------------------------------------------

    The Commission requests comment on the potential impact of the
proposed amendments on the economy on an annual basis. The Commission
requests that commenters provide empirical data and other factual
support for their views to the extent possible.

VI. Statutory Authority

    The Commission is proposing amendments to rule 13f-1 and Form 13F
pursuant to the authority set forth in sections 3(b), 13(f), 23, 24,
and 36 of the Exchange Act [15 U.S.C. 78c(b), 78m(f), 78w, 78x, and
78mm].

List of Subjects

17 CFR Part 240

    Confidential business information, Reporting and recordkeeping
requirements, Securities.

17 CFR Part 249

    Reporting and recordkeeping requirements, Securities.

Text of Proposed Rule and Form Amendments

    For the reasons set out in the preamble, the Commission proposes to
amend title 17, chapter II of the Code of Federal Regulations as
follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
1. The general authority citation for part 240 continues to read as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et
seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C.
1350; Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112-
106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *

Sec.  240.13f-1   [Amended]

0
2. Amend Sec.  240.13f-1 by:
0
a. In paragraph (a)(1), removing ``$100,000,000'' and adding in its
place ``$3.5 billion'';
0
b. In paragraph (c), removing ``$100,000,000'' and adding in its place
``$3.5 billion''; and
0
c. Removing the authority citation at the end of the section.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
3. The general authority citation for part 249 continues to read as
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124
Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012);
Sec. 107, Pub. L. 112-106, 126 Stat. 313 (2012), and Sec. 72001,
Pub. L. 114-94, 129 Stat. 1312 (2015), unless otherwise noted.
* * * * *
0
4. Form 13F (referenced in Sec.  249.325) is amended by:
0
a. In General Instruction 1, revising ``$100,000,000'' to read ``$3.5
billion'';
0
b. In General Instruction 3, revising the first sentence to read ``Rule
13f-1(a)(1) provides that a Manager must file a Form 13F report with
the Commission within 45 days after the end of the calendar year and
each of the first three calendar quarters of the subsequent calendar
year.'';
0
c. In General Instruction 3, replacing ``the EDGAR Filing'' with ``the
filing made on the Commission's Electronic Data Gathering, Analysis,
and Retrieval (``EDGAR'') system'';
0
d. In the last sentence of the second paragraph of the Instructions for
Confidential Treatment Requests, delete the phrase ``the Commission's
rules and regulations adopted under'';
0
e. In Instruction 2.d for Confidential Treatment Requests, revising it
to read as follows: ``Demonstrate that the information is both
customarily and actually kept private by the Manager, and how release
of this information could cause harm to the Manager.''
0
f. In Special Instruction 3, deleting the phrase ``(and in the EDGAR
submission header)'';
0
g. In Special Instruction 5, revising it to read as follows: ``Present
the Cover Page and the Summary Page information in the format and order
provided in the form. If the Manager has a number assigned by the
Financial Industry Regulatory Authority's Central Registration
Depository system or by the Investment Adviser Registration Depository
system (``CRD number''), provide the Manager's CRD number. If the
Manager has a filing number (e.g., 801-, 8-, 866-, 802-) assigned by
the Commission (``SEC filing number''), provide the Manager's SEC
filing number. The Cover Page may include information in addition to
the required information, so long as the additional information does
not, either by its nature, quantity, or manner of presentation, impede
the understanding or presentation of the required information. Place
all additional information after the signature of the person signing
the report (immediately preceding the Report Type section). Do not
include any additional information on the Summary Page or in the
Information Table.'';
0
h. In Special Instruction 7, deleting the phrase ``on the Summary
Page'';
0
i. In Special Instruction 7.a, deleting the phrase ``on the Summary
Page'';
0
j. In Special Instruction 8, deleting the phrase ``on the Summary
Page'';
0
k. Replacing the first sentence of Special Instruction 8.b with the
following ``If this Form 13F report reports the holdings of one or more

Managers other than the Manager filing this report, enter in the List
of Other Included Managers all such Managers together with any CRD
Number or SEC filing number assigned to each Manager and, if known, the
Managers' respective Form 13F file numbers (The Form 13F file numbers
are assigned to Managers when they file their first Form 13F.).'';
0
l. In Special Instruction 9, revising ``rounded to the nearest one
thousand dollars (with ``000'' omitted)'' to read ``rounded to the
nearest dollar'';
0
m. Deleting Special Instruction 10 and renumbering Special Instructions
11, 12, and 13 to 10, 11, and 12, respectively;
0
n. In renumbered Special Instruction 10, revising ``$100,000,000'' to
read ``$3.5 billion'';
0
o. In renumbered Special Instruction 11.b.i, revising the phrase ``rule
13f-1(c) (the ``13F List'')'' to read ``the 13F List''; and
0
p. Deleting renumbered Special Instruction 12 in its entirety and
replacing it with the following:

``Filing of Reports

0
13. Reports must be filed electronically using EDGAR in accordance with
Regulation S-T. Consult the EDGAR Filer Manual and Appendices for EDGAR
filing instructions.''
0
q. Deleting the Paperwork Reduction Act Information section in its
entirety and replacing it with the following:
``PAPERWORK REDUCTION ACT INFORMATION
    Persons who are to respond to the collection of information
contained in this form are not required to respond to the collection of
information unless the form displays a currently valid Office of
Management and Budget (``OMB'') control number. Please direct comments
concerning the accuracy of the information collection burden estimate
and any suggestions for reducing the burden to the Secretary,
Securities and Exchange Commission, Washington, DC 20549. OMB has
reviewed this collection of information under the clearance
requirements of 44 U.S.C. 3507.'';
0
r. In the Institutional Investment Manager Filing this Report section
on the Cover Page, adding ``CRD Number (if applicable):__'' and ``SEC
Filing Number (if applicable):__ '';
0
s. In the List of Other Managers Reporting for this Manager section on
the Cover Page, adding ``CRD Number (if applicable)'' and ``SEC Filing
Number (if applicable)'' columns;
0
t. In the Report Summary on the Form 13F Summary Page, replacing
``(thousands)'' with ``(round to the nearest dollar)'' in the Form 13F
Information Table Value Total row.
0
u. In the List of Other Included Managers section of the Form 13F
Summary Page, adding ``CRD Number (if applicable)'' and ``SEC Filing
Number (if applicable)'' columns; and
0
v. In the Form 13F Information Table, replacing ``(x$1000)'' with ``(to
the nearest dollar)'' in the Value subcolumn.

    By the Commission.

    Dated: July 10, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-15322 Filed 7-30-20; 8:45 am]
BILLING CODE 8011-01-P