What the Institutional Investment Manager Needs to Know About SEC Reporting under Section 13(f)


Institutional investment managers that have investment discretion over $100,000,000 or more in certain equity securities must report those holdings on Form 13F filed through the SEC’s EDGAR system. Under SEC guidelines, an institutional investment manager includes entities that invests in (buys or sells) securities for its own account. Institutional investment managers also include natural persons or entities that exercise investment discretion over the account of another natural person or entity. Institutional investment managers can include investment advisors, banks, insurance companies, broker-dealers, pension funds, and even corporations. The definition is in no way limited to the aforementioned entities.

An institutional investment manager has investment discretion if, directly or indirectly, such manager is (1) authorized to determine what securities shall be purchased or sold by or for the account; (2) makes decisions as to what securities shall be purchased or sold by or for the account even though some other person may have responsibility for such investment decisions; or (3) otherwise exercises such influence with respect to the to the purchase and sale of securities by or for the account as the Commission may determine by rule.

The securities to be reported include both equity securities and certain derivatives of such securities that are specifically listed on a quaterly basis by the Commission. These securities are known as Section 13(f) securities and must collectively reach the $100,000,000 threshold during a specified reporting period. Once the threshold is reached, the Form 13F must be submitted on a quarterly basis for the upcoming year.

Recently the SEC’s Office of Inspector General has brought to the attention of the Division of Investment Management serious failures in the SEC’s monitoring for delinquent filers and review process for those Form 13Fs that are filed. In response, the Division, in working with the Office of Compliance Inspections and Examinations, will be stepping up its enforcement efforts in the coming year. Now is the time to ensure that your clients, some of whom may be filers under Section 13(f), are in compliance with their reporting requirements.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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