Securities and Exchange Commission Chairman Jay Clayton, pictured in Washington, D.C., in June.
Photo: Smialowski Brendan/Zuma PressThe Securities and Exchange Commission proposed sharply raising the size threshold of funds required to report their U.S. stockholdings quarterly, a move that would end such disclosures for nearly 90% of current filers, including many hedge funds and mutual-fund firms.
The proposal would mean investment managers with less than $3.5 billion in such holdings—including securities bought with leverage—no longer need to reveal the details of their portfolios. Those details include the number of shares held in a company and the value of those holdings at quarter’s end. The current threshold, unchanged since its 1975 introduction, is $100 million.
While many of the biggest-name investment managers—including Warren Buffett’s Berkshire Hathaway Inc., BlackRock Inc. and Citadel LLC—would continue to file, the majority of filers wouldn’t need to. The move would affect about 4,500 of the roughly 5,000 current filers, the SEC said.
The proposal is published in the Federal Register and subject to a 60-day comment period before potential SEC approval.
The SEC described the proposed change as a way to provide cost relief to smaller managers while still capturing nearly all the data the filings previously had. The regulator said the new threshold would retain data “on over 90% of the dollar value of the securities currently reported.”
The SEC said a new $3.5 billion threshold would reflect “proportionally the same market value of U.S. equities that $100 million represented in 1975.”
Some investors said the potential removal of so many of such filings would make it harder to thoroughly vet smaller managers. They say the filings can help investors assess a manager’s portfolio and whether the firm invests the way it purports to. The filings can be particularly helpful when it comes to managers that invest in small-cap stocks, they say.
Activist investors that fall under the higher proposed dollar threshold could reap some benefits.
“For a manager under $3.5 billion, it could provide them more time to build positions so they’ll be less visible,” said Ropes & Gray Partner Laurel FitzPatrick, who heads the firm’s hedge-fund practice. “But it also might make it more difficult for them to ascertain other, smaller investors that might be supportive of changes they’d like to make.”
The quarterly reports, known as 13Fs, are widely followed in the investing community, but they are far from comprehensive. They are revealed at a lag—due 45 days after the quarter ends—and a fund can ask the SEC for confidential treatment if it is in the middle of building a new position. Funds also don’t need to reveal short bets against companies, currency positions or fixed-income stakes.
SEC commissioner Allison Herren Lee issued a statement saying the proposal “joins a long list of recent actions that decrease transparency and reduce both the commission’s and the public’s access to information about our markets.”
The SEC’s statement didn’t mention changes to 13Ds or 13Gs, other popular disclosure forms that are typically filed when an investor amasses a certain percentage of a company’s stock.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Juliet Chung at juliet.chung@wsj.com
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