Shining a Light on Confidential Filings

Ipreo’s vast stable of industry-related content extends well beyond this blog, our award-winning infographics, and the frequent analysis we provide for prominent financial publications. One of our most essential outlets is our regularly published investor relations newsletter, Better IR.

The Better IR newsletter speaks directly to the investor relations industry about topics that are relevant to them. In the past we’ve revisited corporate earnings releases, options ownership disclosures, and high-frequency trading.

Today, we’re going to share a piece from our latest issue, which covers Section 13(f) of the Securities Exchange Act.

The following is an excerpt from “Shining a Light on Confidential Filings,” from the November 2015 issue of Ipreo’s Better IR.

“In 1934, Congress passed Section 13(f) of the Securities Exchange Act to increase the public availability of information regarding institutional investor holdings. As most readers of this publication know, institutional investment managers that use the United States mail (in other words, investors that use any means of United States interstate commerce in the course of their business) and manage investment assets of $100 million or more in Section 13(f) securities (as defined by the SEC) must file Form 13F; through this form, the investment manager lists details of its security holdings as of the last day of the reporting period which include names of the issuers, class, number of shares, etc., all of which shall be available to the public.

However, in some cases the SEC will allow investors to submit an application to confidentially file some or all of its assets under management. Investors may want confidential treatment if it believes that increased transparency could reveal proprietary information that allows competitors to take advantage, or “free-ride” on a fund manager’s efforts to identify gainful investment and trading strategies. Additionally, some fund managers may be wary that increased transparency will allow other “front-runner” investors to trade against them while they are in the process of accumulating or reducing a position. Historically, this strategy has been popular among hedge-fund entities as well as investors that have very concentrated portfolios (as investors can more easily determine strategies of managers with concentrated portfolios if the latter makes any changes to its’ positions), particularly with high-profile activists who may not want immediate market reactions to initiations or changes or in exposures.

You can find the rest of the article, and plenty of other compelling content, in last fall’s Better IR.

Stay tuned for the next issue of the newsletter, coming soon!