If you’re intrigued by how the biggest players in finance reveal their stock moves, you’ll want to pay attention to Form 13F. This quarterly filing, mandated by the Securities and Exchange Act of 1934 (“1934 Act”), Section 13(f), requires institutional investment managers overseeing over $100 million in securities to disclose key details about their holdings. This includes the name of the issuer, the class of the security, CUSIP numbers, the value of the securities, the number of shares held, and whether the firm has sole, shared-defined, or shared-other investment discretion, other managers, and voting authority.
But there’s more to the story. Recently, the Securities and Exchange Commission (“SEC”) has intensified its focus on Form 13F filings, including launching sweep exams to ensure compliance. This heightened scrutiny underscores the importance of these filings in maintaining market transparency and integrity.
The initial Form 13F must be submitted 45 days after the end of the fourth quarter in the year an investment manager surpasses the $100 million threshold. Subsequent filings are due within 45 days after each calendar quarter’s end, continuing as long as the threshold is maintained.
Understanding the intricacies of Form 13F is crucial for investors and market watchers alike. In this month’s RMU, we take a look at new requirements for Form 13F filers, including Form N-PX.
What are Section 13(f) securities?
Every calendar quarter, the SEC publishes a list of Section 13(f) securities that must be reported. These typically encompass U.S. exchange-traded stocks (such as those on the NYSE, NASDAQ, and AMEX), shares of exchange-traded funds (ETFs), shares of closed-end investment companies, equity options and warrants, and certain convertible debt securities. It’s important to note that mutual funds are not classified as Section 13(f) securities and should not be included in the Form 13F filing.
New Requirements for Form 13F Filers
In November 2022, the SEC adopted new regulations requiring that Form 13F filers extend reporting of proxy voting authority. This requires Form 13F filers to report on how they voted on all “say-related” matters via submission of the Form N-PX on an annual basis. The adopted regulations took effect on July 1, 2024, and the first Form N-PX filing must be submitted by August 31, 2024. The initial filing will reflect all “say-related” votes cast between July 1, 2023, and June 30, 2024. New Form N-PX filings will consist of three parts.
- A Cover Page: To identify if the filer is a fund or an institutional investment manager as well as other important identifying information.
- A Summary Page: To include any other institutional investment managers covered by the filing.
- A Voting Information Report: To include each voting matter, the number of shares voted or instructed to be voted, and information regarding shares on loan and not recalled.
Takeaways
The SEC has made Form 13F filings a major focus area and continue to expand regulations for Form 13F filers. SEC sweep exams on Form 13F filers are already taking place, with the commission requesting information on the adviser’s policies and procedures related to Form 13F, production of documents for any Form 13F filings submitted during 2023, and explanations/exemptions on any filings the adviser failed to make during the review period. In September 2023, the SEC announced a settlement against an investment advisory firm who failed to file Form 13F for multiple years[1]. As a result, the SEC enforced various sanctions in the firm, including a cease-and-desist order from committing any violations or future violations, censure, and a fine in excess of $100,000.
Conclusion
With the industry evolving at such a rapid pace, new regulations for investment managers are being implemented on an annual basis. Institutional investment managers on the cusp of the $100 million threshold for filing Form 13F should make it a top priority to review on a quarterly basis if a Form 13F filing is required, to ensure compliance with SEC regulations. This is only accentuated with the new Form N-PX requirements and is only a matter of time before the SEC makes this one of their focus areas as well.
To find out more about how Core Compliance can assist with Form 13F and Form N-PX compliance program implementation, review, and filings, please contact us at info@corecls.com or by phone at (619) 278-0020.
Author: Christopher Hufty, Compliance Consultant; Editor: Maggie Tavares, Sr. Compliance Consultant, Core Compliance & Legal Services (“Core Compliance”). Core Compliance works extensively with investment advisers, broker-dealers, investment companies, and private fund managers on regulatory compliance issues.
This article is for information purposes and does not contain or convey legal or tax advice. The information herein should not be relied upon regarding any particular facts or circumstances without first consulting with a lawyer and/or tax professional.
[1] https://www.sec.gov/files/litigation/admin/2023/34-98381.pdf