What is SEC Form 13F?

All institutional investment managers under $100 million in assets must file the SEC Form 13F quarterly report. Disclosure of equity ownership can reveal market insights from intelligent money.

After the quarter ends, managers must file Form 13F within 45 days. Most funds wait until the conclusion of this period to hide their investing strategy from competitors and the public.

Knowing SEC Form 13F

Congress mandated 13F in 1975. It was meant to show the U.S. public the largest institutional investors’ holdings. This was intended to boost investor confidence in the nation’s financial markets.

Institutional investment managers include mutual funds, hedge funds, trust companies, pension funds, insurance companies, and registered investment advisors.

Many smaller investors use 13F filings to guide their investment plans since they reveal Wall Street’s best stock pickers’ holdings. They believe the nation’s largest institutional investors are wisest and can impact markets due to their size. Thus, buying or selling the same stocks makes sense.

Key SEC Form 13F Issues

Smaller investors seeking to emulate top money managers like Daniel Loeb, David Tepper, and Seth Klarman review 13F filings. The financial press often compares quarterly filings to reflect what fund managers buy and sell. There are several issues with 13F filings that require vigilance.

Unreliable Data

Many criticize 13F for giving hedge fund managers a loophole. In 2010, the SEC noted the form’s many issues and suggested several improvements to guarantee that “useful and reliable data is provided to the public and government regulators.”

The SEC’s study says, “The SEC would be expected to use Section 13(f) information extensively for regulatory and oversight purposes; no SEC division or office conducts any regular or systematic review of the data filed on Form 13F.”

This may explain how Bernard Madoff, a notorious fraudster, operated a successful Ponzi scheme despite filing 13F filings quarterly.

Reporting Time

The fact that fund managers must file 13F reports 45 days after each quarter is another common complaint. Most managers submit 13Fs late to avoid disclosing their plans to competitors. Investors who get 13Fs may be reviewing stock purchases made more than four months before the filing.

The progressive charity Americans for Financial Reform wrote to SEC acting chair Allison Herren Lee on March 31, 2021, urging the SEC to increase Form 13F reporting frequency and product disclosure.

The National Investor Relations Institute advised the SEC to report ownership positions monthly with a 15-day interval.

Herd Behavior

Professional and retail investors face the risk of money managers sharing investment ideas. Everyone has behavioral biases, including hedge fund managers. In the end, fund managers are safer being wrong with the majority than alone. Trades can become crowded, and stocks can become expensive. Small investors that are late to a trade may be late to leave.

Unfinished Picture

Funds must record long holdings, put and call options, ADRs, and convertible notes in 13F filings, which is a concern. This may be deceiving, as some funds rely heavily on short-selling and solely employ long positions as hedges. One cannot identify these hedges from long positions on 13F forms.

SEC Form 13F: Who Must File?

Institutional managers with $100 million must disclose equity holdings on SEC Form 13F.

The New 13F Rule?

The 2022 SEC 13F rule requires registrants to round security holding figures to the nearest dollar rather than the thousandth dollar. Form 13F must also be filed via EDGAR.

What is the difference between Forms 13D and 13F?

SEC Form 13F requires institutional managers with $100 million or more to disclose their holdings. The beneficial owner report Form 13D must be filed when a person or group acquires more than 5% of a company’s equity securities’ voting class.

Bottom Line

SEC Institutional managers with $100 million or more must file Form 13F. To make significant managers’ financial holdings transparent. Though transparent, the form has drawn many critiques that the SEC has yet to resolve.

Conclusion

• Institutional investment managers with $100 million in assets must submit Form 13F quarterly to the SEC.
• Congress intended these reports to reveal the nation’s largest investors’ holdings.
• The dependability and timeliness of these files are poor, but smaller investors utilize them to track the “smart money” in the market.