Broadly, investors are divided into two categories: retail and institutional. Retail investors are typically single investors making their own decisions, while institutional investors make investment decisions on behalf of a larger group. When smaller investors put money into an institution, they need to know where that money goes and its overall performance. To increase transparency in the management of institutional investments, the U.S. Securities and Exchange Commission requires certain filings, including SEC Form 13F.
SEC Form 13F requires that institutional investors with holdings exceeding $100 million file a quarterly form to identify those holdings. Although these investors are encouraged to list as many holdings as possible, accurately, there are thresholds at which they must include certain holdings in the data. With this guide, institutional managers and compliance specialists will understand what is SEC Form 13F, the essential information included in a Form 13F filing, which groups are required to file, and the standard processes for doing so.
Who Is Required to File Form 13F?
As a rule, institutional investment managers are required to file Form 13F each quarter. Per the SEC, this category includes people who have the investment discretion to buy or invest in securities on behalf of an institution or a larger group of people. Investment organizations that may need to file this form include hedge funds, mutual funds, banks, insurance companies, and others, whether they are headquartered inside the U.S. or manage U.S. holdings from a foreign location.
People who oversee investments on behalf of a government organization, such as a municipal pension funds manager, also qualify as institutional investment managers. By comparison, someone who invests entirely on their own behalf would likely not be required to file Form 13F, even if they had holdings exceeding the $100 million threshold.
When considering the $100 million threshold, institutional investment managers should plan to file during each year in which their holdings reach $100 million. The SEC claims that qualifying organizations should plan to file the December report for the year in which they reach $100 million in qualified holdings. The manager should also file for the next three quarters’ reporting requirements, even if the holdings drop below $100 million during that time.
What Information Does SEC Form 13F Require?
The types of holdings that institutional investors must put on Form 13F relate specifically to securities classified under Section 13(f) of the Securities Exchange Act of 1934. Broadly, it includes securities that are traded on a public exchange. Under this heading, managers may need to include their holdings in exchange-traded stock, equity options, warrants, shares in closed-end investment companies and more. In contrast, shares in open-end investment companies are not required for reporting under Form 13f. The SEC publishes a quarterly list of Section 13(f) securities that managers can review to determine which ones to include.
Once managers have a list of securities they need to include for their Form 13F filing, they must consider the types of information they have to disclose. The latest requirements call for organizations to round the values to the nearest dollar, instead of the nearest thousand dollars. Details for each holding include:
- Issuer name
- Title of class
- Number of shares
- Fair market value
- CUSIP or FIGI number, which are codes designed to identify individual securities
- Who maintains investment discretion under the holdings, whether it is a single manager or multiple
- Shares in which the manager retains voting authority, and how that authority is split
There are a few exceptions to the rules, depending on the class of investment and its value. For example, the SEC notes that managers may leave out individual holdings with fewer than 10,000 shares or less than $200,000 in fair market value. When considering disclosing options, managers should only consider the value of the options, not the value of the shares.
Filing Deadlines and Requirements
As a quarterly filing, SEC Form 13F must be filed within 45 calendar days after the end of the quarter. Although a guide with a printed blank form and instructions are available online through the SEC, the commission requires that institutional investment managers file the form online using EDGAR. This filing method requires that the information be converted into data and formatting that can be easily published online in a conventional format.
Although managers should understand how to file Form 13F, they may still make occasional mistakes. Common errors in these filings include:
- Problems with the XML, which inhibits processing of the filing
- Inaccurate CUSIP, which could list the wrong security
- Incorrect or outdated values
- Paper filing without being granted a hardship exemption
Typically, organizations can avoid these problems by selecting SEC filing software that converts data into the right format automatically. Accurate documentation makes it easier for managers to file on time.
Implications of Non-Compliance
Since SEC Form 13F is a public disclosure of an institutional investors’ overall 13(f) security holdings, many of these organizations choose to file their reports at the end of SEC filing deadlines. Some groups see this as a tactic to avoid revealing changes to their investment strategies, such as short positions, but it can come at a cost. Although the SEC does grant extensions on certain filings, Form 13F is not one of them. The SEC directs late filers to submit information as soon as possible, instead of submitting an incomplete file on time.
As a penalty for excessively late or persistent late filings for Form 13F, the SEC may choose to levy fines up to $750,000 or more. In addition, late or inaccurate filings put institutional investments at risk. This form aims to increase investor confidence in the firm managing the investments. When managers fail to provide regular reporting, or make errors in their filings, they increase the risk of heightened SEC scrutiny or damage to their overall reputations. Prompt filing with comprehensive, accurate details can avoid these problems and demonstrate proper governance and oversight of the funds.
How to Streamline SEC 13F Compliance
Improving compliance with the SEC often requires tools to increase accuracy, transparency, and integrity throughout the process. Automation streamlines the effort of collecting data, making it easier for managers to take various details and present them with proper formatting for SEC submission.
At DFIN, our platform and suite of tools simplify the work of ensuring that your organization’s filings are complete and timely. Our systems integrate seamlessly with portfolio management systems, so you do not have to enter information in multiple places. We can help you reduce errors, maintain a complete audit trail and confirm filings, while protecting your firm’s sensitive information. To learn more, contact us to explore our regulatory reporting solutions or speak to a filing expert.
