Sep. 01, 2020
To whom it may concern: I write today to express my disappointment with the Security Exchange Commission's proposed rule-making with respect to the reporting threshold for Form 13F (File Number S7-08-20). I am adamantly opposed to such a dramatic change in the filing threshold, which would substantially reduce public access to US listed company shareholdings without any material offsetting benefit for the investment management industry. The increased threshold would cast a long, dark shadow over the vast majority of active fund managers' shareholdings and in turn, a dark cloud over the shareholder register of publicly traded companies listed on US stock exchanges. Indeed, the proposed increase in threshold would relieve the vast majority of institutional investors from reporting requirements and thereby substantially reduce market information pertaining to company ownership and institutional investor positioning. Neither outcome has positive implications for market transparency and information efficiency. In fact, the proposed threshold increase would substantially diminish Market transparency. By establishing a thresholding considerably above the median size of active fund managers, the $3.5 billion threshold would result in filings from only the largest investment management firms, many of which have achieved scale primarily through a focus on passive, index tracking whether formally or de facto. In either case, such disclosure offers very little informational value as such investors are passive in nature and hardly the type of shareholder / owner willing to engage management directly or in many cases, even participate actively in proxy matters, including board appointments. In reading the proposed rule-making, the SEC justifies its proposal in terms of reduced compliance costs for small managers. On page 18, the SEC notes approvingly as supporting evidence average compliance costs between $15,000 and $30,000 per annum. Such cost would amount to 1 basis point of fee income for an asset manager with $225 million in assets under management. Even in light of substantial fee compression in the investment management industry, 1 basis point cost against a minimum 50 basis point active management is dinimus and hardly a burden in need of redress. In short, I urge the SEC to reconsider this regulatory change; it would mark a radical reduction in market information and transparency without clear benefit. If the intent is to reduce regulatory burden, perhaps an alternative proposal might include temporary forbearance for new investment firms for a period of time and/or a more modest increase to a threshold of $250 million. The alternative proposal would reduce initial compliance costs and provide a modest incentive for fund formation, while ensuring public access to portfolio holdings of active investors with the capacity to secure material shareholdings and exert influence either explicitly or implicitly on US public companies. A targeted policy reform may be warranted, wholesale abandonment of public shareholding disclosure by the vast majority of active managers certainly is not. Sincerely yours, Ryan J. Prince, MBA Private investor with more than 15-years investment experience in public and private markets +1 (917) 575-1290