[Federal Register Volume 85, Number 148 (Friday, July 31, 2020)]
[Proposed Rules]
[Pages 46016-46032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15322]


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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.

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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 protected]. Please include 
File Number S7-08-20 on the subject line;

Paper Comments

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

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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 (202) 551-6792, or Brian 
McLaughlin Johnson, Assistant Director, at (202) 551-6792, 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\
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    \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)].
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    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\
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    \2\ Food Marketing Institute v. Argus Leader Media, 139 S. Ct. 
2356 (2019).
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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\
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    \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).
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    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

[[Page 46018]]

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

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[[Page 46019]]

[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


[[Page 46020]]


    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.
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    \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).
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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\
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    \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.
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    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\
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    \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.
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    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\
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    \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.'').
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    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

[[Page 46021]]

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\
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    \35\ Based on the Federal Reserve Data, supra footnote 27.
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     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\
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    \36\ Based on the Personal Consumption Expenditures Chain-Type 
Price Index, published by the U.S. Department of Commerce.
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    [cir] Using the CPI inflation standard through 2018, the threshold 
would be $453 million.\37\
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    \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.
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     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\
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    \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.
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    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\
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    \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

[[Page 46022]]

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

[[Page 46023]]

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

[[Page 46024]]

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

[[Page 46025]]

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

[[Page 46026]]

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

[[Page 46027]]

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

[[Page 46028]]

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.

[[Page 46029]]

 
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.

[[Page 46030]]

 
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 protected], 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

[[Page 46031]]

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

[[Page 46032]]

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