NYSE Files Petition To Shorten 13F Filing Deadline

NYSE Files Petition To Shorten 13F Filing Deadline

The NYSE Euronext (NYSE:NYX) together with the Society of Corporate Secretaries Governance Professionals (Society) and National Investor Relations Institute (NIRI) filed a petition to change the rule under section 13(f) of the Securities and Exchange Commission (SEC) Act of 1934.

The group is requesting the SEC shorten the quarterly reporting deadline for institutional investment managers to report their securities holdings with at least $100,000,000  market value under rule 13f(1) from 45-day to 2 business days after the end of the calendar quarter.

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They noted that section 929X of the Dodd-Frank Wall Street Reform and Consumer Protect Act requires the SEC to implement rules that would obligate institutional investment managers to report their short sale activities publicly at least once a month.

The NYSE Euronext (NYSE:NYX)’s group believe that a “similarly substantial increase of the frequency of form 13F reporting” is beneficial investors and public companies.

According to them, the existing 45-day delay period keeps investors and public companies from obtaining material information in a timely manner therefore they cannot tell whether the information reported by institutional investors in the 13F remains current.

They pointed out that the 45-delay period hinders a public company’s ability to identify and engage their shareholders as well as their ability to consult with shareholders regarding “on pay,” proxy access and other important corporate governance issues.

In addition, the petition emphasized that the assets owned by institutional investors have grown tremendously. According to the group, institutional investors held 73 percent of the total outstanding equity in the 1,000 largest U.S. Corporation in 2009. Hedge funds manages $2 trillion assets with an average turnover rate of 35% every quarter. Institutional investors often have shorter-term horizon compared with individual investors.

Given the significance of the sector in the capital markets, investors and public companies obtain “little meaningful information” from Form 13F about the equity holdings of institutional investors because of the 45-day delay period.

“With the existing time frames managers may structure acquisitions and dispositions around filing deadlines.” According them, an institutional investment manager could use the 45-delay period to delay reporting significant purchased of sales of securities. The 45-delay period provides “advantage to managers at the expense of other investors without knowing the size and scope of institutional holdings, and in that manner erodes price discovery, market transparency and, ultimately, investor confidence,” the group explained in their petition letter,

Furthermore, the group noted that the SEC originally proposed the filing of form 13f within 30 days, but adopted the 45-day extension in its final rule in consideration with the views of a number of commentators that the “30 days filing requirement created an undue burden.”

They emphasized that the original reason of the commission is no longer valid or relevant to large institutional investors because of the substantial advances in information technology.

According to the group, their proposal to shorten the delay period for13f filings supports the objectives of Rule 13f -1 in 1978. The rules states that, “the reporting system is designed to improve the quality of data available… and by making the Commission responsible for all gathering, processing, and dissemination of data… Congress intended to permit establishment of uniform reporting standards and a uniform centralized data base.”

The group emphasized the quality of information available to the SEC, investors, public companies can only be improved if the 13f filings are reported promptly, and require institutional investment managers to report in a time frame similar to the filing of 13D, 13G and 4.

With the petition, they believe it would make “reporting standards more uniform remove an unfair advantage held by managers over other investors; helping maintain a fair, orderly and efficient market.” Furthermore, the group emphasized that reduction of the 45-day delay period would align rule 13f-1 with public company governance practices.

Below is the proposed revision of NYSE Euronext (NYSE:NYX), Society, and NIRI to paragraph a of Rule 13f-1:

(1) 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 with the Commission within [45] two business days after the last day of such calendar year and within [45] two business days after the last day of each of the first three calendar quarters of the subsequent calendar year.