Release No. 34-15461

January 5, 1979

Filing and Reporting Requirements Relating to Institutional Investment Managers

ACTION: Final rules.

SUMMARY: The Commission announces the amendment of the rule and form governing the reporting requirements of institutional investment managers exercising investment discretion over accounts having in the aggregate more than $100,000,000 in exchange-traded or NASDAQ-quoted equity securities. Under the amendment, as adopted, such managers are required to file a report within 45 days after the end of each calendar year and within 45 days after the last day of the first three calendar quarters of the subsequent year.

EFFECTIVE DATE: February 5, 1979.

FOR FURTHER INFORMATION CONTACT: W. Scott Cooper, Esq. (202-755-1792), Division of Investment Management, Securities and Exchange Commission, 500 North Capitol Street, Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission (the "Commission") today announced the amendment of Securities Exchange Act Rule 13f-1 17 CFR 240.13f-1 and related Form 13F 17 CFR 249.325, pursuant to Section 13(f) of the Securities Exchange Act of 1934 15 U.S.C. 78a et seq. as amended by Pub. L. No. 94-29 (June 4, 1975) (the "Exchange Act"). The amendment to the Rule and Form adopted today requires that institutional investment managers, subject to the reporting requirements under the Rule, file a report on a quarterly basis rather than annually as originally adopted on June 15, 1978, and announced in Exchange Act Release No. 14852 42 FR 26700.

Section 13(f) of the Exchange Act was adopted by Congress as part of the Securities Acts Amendments of 1975. the reporting system required by Section 13(f) is intended to create in the Commission a central repository of historical and current data about the investment activities of institutional investment managers, in order to improve the body of factual data available and to facilitate consideration of the influence and impact of institutional investment managers on the securities markets and the public policy implications of that influence. Section 13(f) empowers the Commission to adopt rules which would create a reporting and disclosure system to collect specific information concerning Section 13(d)(1) 15 U.S.C. 78m(d)(1) ¹ equity securities held in accounts over which certain institutional investment managers exercise investment discretion. It gives the Commission broad rulemaking authority to determine the size of the institutions required to file reports, the format and frequency of the reporting requirements, and the information to be disclosed in each report.

The Rule, as adopted on June 15, 1978, required that an institutional investment manager exercising investment discretion with respect to accounts having more than $100,000,000 or more in exchange-traded or NASDAQ-quoted equity securities on the last day of any of the twelve calendar months of a calendar year file annually with the Commission, and, if a bank, with the appropriate banking agency, within 45 days after the last day of such calendar year, five copies of Form 13F. The form required the reporting of the name of the issuer and the title of class, CUSIP number, number of shares or principal amount in the case of convertible debt, and aggregate fair market value of each such equity security held. The form also required information concerning the nature of investment discretion and voting authority possessed.

When the Commission announced the adoption of Rule 13f-1, the Commission solicited comment on the usefulness and practicality of quarterly reporting. The Commission received 124 letters of comment during the comment period which expired on August 31, 1978. In general, the main areas of comment related to the usefulness of the information and the attendant costs.

Many commentators felt quarterly information on the holders of common stock would be invaluable to a trading desk involved in block transactions and would facilitate the function of block trading and enhance the liquidity of the marketplace. A number of commentators pointed out that quarterly reporting would provide a greater basis for comparison shopping among investment managers. Such commentators emphasized that an evaluation of the investment philosophy and policies of a prospective manager is crucial in making an effective comparison and that such an evaluation is dependent upon a periodic examination of a managers investment decisions as reflected by his holdings and transactions. Both corporations and financial reporting services asserted that quarterly reporting is needed to provide corporate treasurers with current information concerning institutions owning their own stock. They pointed out that many stockholders take ownership in nominee or street name, making it difficult to trace such information and making it difficult to secure proxies on important corporate matters.

The comments in opposition to the usefulness of quarterly reporting took issue with the assertions that more frequent reports would be of utility to block traders or enhance market liquidity. Commentators opposed to quarterly reporting also disputed the usefulness of the reports as providing a basis for comparison among different investment managers. In addition, opponents to quarterly reporting believed that information about stock ownership was either currently available or more properly required under the beneficial ownership reporting requirements.

Based upon the estimates of the cost of compliance with the reporting requirements supplied by prospective reporting institutions, it appears that the cost to the institutions is generally low in comparison with the size of the institution which is required to report. The mean of all the estimates submitted to the Commission was $3,000 per report.

Although acknowledging relatively low cost, those commentators opposed to quarterly reporting stated, among other things, that the cost of compliance outweighed the benefit to the public in increasing the frequency of reporting and that as another cost of doing business it would reduce to the ability of operations such as bank trust departments to become profitable.

The Commission has concluded that it is in the public interest to require quarterly reporting at this time, because, among other things, the Commission does not perceive any significant obstacles to quarterly reporting nor any undue hardship for reporting institutions. In addition, the Commission believes that the simplicity of the form and the recent issuance of an interpretative release ² will enhance the likelihood of an effectively functioning system. The utility of the information was evidenced by the large number of commentators who expressed an interest in receiving information from quarterly reports. Finally, if quarterly reporting is not required at this time, such data might be lost altogether thereby creating gaps in the continuous flow of information which may be utilized for future policy decisions.

The amendments to Rule 13f-1 and Form 13F require an institutional investment manager subject to the reporting requirements for a particular calendar year to file Form 13F within 45 days after the last day of such calendar year and within 45 days after the last day of each of the first three calendar quarters in the subsequent calendar year.

Certain Findings

As required by Section 23(a)(2) of the Exchange Act 15 U.S.C. 78w(a)(2), the Commission has considered the impact which the Rule and Form as amended herein would have on competition. The Commission has found that requiring the filing of Form 13F on a quarterly basis will not significantly burden competition. Furthermore, the Commission has determined that any possible resulting competitive burdens will be outweighed by, and are necessary and appropriate to achieve, the benefits of this information to investors.

As mandated by Section 13(f)(4), in exercising its authority under Section 13(f) the Commission has determined that its action is appropriate in the public interest and for the protection of investors. The Commission finds that the cost of the amendments to the Rule and Form adopted herein are not unreasonable in light of the purposes of the statute.

1. 17 CFR Part 240 is amended by revising paragraph (a) of §240.13f-1 to read as follows:

§240.13f-1 Reporting by institutional investment managers of information with respect to accounts over which they exercise investment discretion.

(a) Every institutional investment manager which exercises investment discretion with respect to accounts holding section 13(f) securities, as defined in paragraph (c) of this section, having an aggregate fair market value on the last trading day of any month of any calendar year of at least $100,000,000 shall file a report on Form 13F §249.325 of this Chapter with the Commission within 45 days after the last day of such calendar year and within 45 days after the last day of each of the first three calendar quarters of the subsequent calendar year.

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2. 17 CFR Part 249 is amended by revising General Instruction C of Form 13F (§249.325) as follows:

§249.325 Form 13F, report of institutional investment managers pursuant to Section 13(f) of the Securities Exchange Act of 1934.

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General Instructions

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C. Filing of Form 13F. Five copies of Form 13F shall be filed with the Commission within 45 days after the end of the calendar year 1978 and each calendar year and the first three calendar quarters of each calendar year thereafter. As required by Section 13(f)(4) of the Act, a Manager which is a bank, the deposits of which are insured in accordance with the Federal Deposit Insurance Act, shall file with the appropriate regulatory agency a copy of every report filed with the Commission pursuant to this subsection by or with respect to such bank. The appropriate regulatory agency with which a copy of this report is to be filed for:

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3. 17 CFR Part 249 is amended by revising the cover page of Form 13F (§249.325) to read as follows:

FORM 13F

INFORMATION REQUIRED OF INSTITUTIONAL INVESTMENT MANAGERS PURSUANT TO SECTION 13(f) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULES THEREUNDER

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Report for the calendar year or Quarter Ended__19__

AUTHORITY; EFFECTIVE DATE

The Commission hereby adopts the amendment of Rule 13f-1 and Form 13F, effective February 5, 1979, pursuant to the authority set forth in Sections 13(f) and 23 of the Exchange Act 15 U.S.C. 78m(f) and 78w.

By the Commission.

²Exchange Act Release No. 15292 dated November 2, 1978 43 FR 52697, November 14, 1978.