Review of the SEC’s Section 13(f) 

Reporting Requirements 

 

 September 27, 2010 

Report No. 480
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

ii 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

MEMORANDUM

September 27, 2010

To: Mary Schapiro, Chairman

Andrew J. Donohue, Director, Division of Investment Management

Henry Hu, Director, Division of Risk, Strategy, and Financial

Innovation

Sharon Sheehan, Associate Executive Director, Office of

Administrative Services

Jeffery Heslop, Chief Operating Officer, Office of the Chief

Operating Officer

Barry D. Walters, Chief FOIAIPA Officer, Office of FOIA and

Records Management Services

David Becker, General Counsel, Office of the General Counsel

Ethiopis Tafara, Director, Office of International Affairs

From: H. David Kotz, Inspector General, Office of Inspector Genera

Subject: Review of the SEC's Section 13(f) Reporting Requirements, Report

No. 480

This memorandum transmits the U.S. Securities and Exchange Commission

Office of Inspector General's (OIG) final report detailing the results of our review

of Section 13(f) reporting requirements. The review was conducted by the OIG

as part of our continuous efforts to assess management of the Commission's

programs and operations and was based on our audit plan.

This report contains 12 recommendations that were developed to strengthen the

SEC's oversight of Section 13(f) reporting. The Chairman's Office and all Office and

Division Directors fully concurred with the recommendations pertaining to its Office

or Division. The Office of Information Technology, Office of the General Counsel,

Office of International Affairs, and the Office of FOIA and Records Management

Services did not provide OIG with written comments. The written responses OIG

received to the draft report are included in its entirety in Appendix V.

Within the next 45 days, please provide the GIG with a written corrective action

plan that is designed to address the agreed-upon recommendations. The

corrective action plan should include information such as the responsible

official/point of contact, time frames for completing the required actions, and

milestones identifying how you will address the recommendations cited in this

report.

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O....'ClO..

'H"'l[CTO'" COf:Hl"'AL
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

iii 

 

Should you have any questions regarding this report, please do not hesitate to 

contact me. We appreciate the courtesy and cooperation that was extended to 

our auditor. 

Attachment 

cc: Kayla J. Gillan, Deputy Chief of Staff, Office of the Chairman 

 Diego Ruiz, Executive Director, Office of the Executive Director 

Barry D. Miller, Associate Director, Office of Legal and Disclosure, 

 Division of Investment Management 
Review of the SEC’s Section 13(f) Reporting 

Requirements

Executive Summary

Background. In 1975, Congress enacted Section 13(f) of the Securities 

Exchange Act of 1934 (Exchange Act), 15 U.S.C. § 78m(f), to increase the public 

availability of information regarding the securities holdings of institutional 

investors. According to the legislative history for Section 13(f), Congress 

intended to create in the Securities and Exchange Commission (SEC or the 

Commission) a centralized repository of historical and current data regarding the 

activities of institutional investment managers in order to improve the body of 

publicly available factual data and thereby increase investor confidence in the 

integrity of the U.S. securities markets. This legislative history also reflects that 

Congress anticipated that government agencies, including the SEC, would be 

expected to make extensive use of the institutional disclosure data in fulfilling 

their responsibilities to protect the public interest within a consistent and 

coordinated regulatory framework. 

Section 13(f) and the Commission’s implementing regulation require institutional 

investment managers that exercise investment discretion with respect to 

accounts holding certain equity securities having an aggregate fair market value 

of $100 million or more on the last trading day in a calendar year to file quarterly 

reports of their holdings with the SEC on Form 13F electronically through the 

Commission’s Electronic Database Gathering and Retrieval (EDGAR) system. 

Under Commission Rule 13f-1, 17 C.F.R. § 240.13f-1, the Form 13F reports must 

be filed within 45 days after the last day of such calendar year and within 45 days 

after the last day of each of the first three calendar quarters of the subsequent 

calendar year. Section 13(f)(3) mandates that the Commission tabulate the 

information contained in the quarterly reports and disseminate that information to 

the public. 

For the purposes of Section 13(f), an institutional investment manager is an entity 

that invests in or trades securities for its own account, or a person or entity that 

exercises investment discretion over someone else’s account. The institutional 

investment managers that are required to file the Form 13F reports typically 

include investment advisers, banks, insurance companies, broker-dealers, 

pension funds and corporations. Institutional investment managers exercise 

investment discretion if they have the power to determine which securities are 

bought or sold for accounts under management, or if they make decisions about 

which securities are bought or sold, even if someone else is responsible for the 

investment decision. 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

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Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

v 

 

 

The securities that must be reported under Section 13(f) generally include equity 

securities that are traded on an exchange or quoted on National Association of 

Securities Dealers Automated Quotations (NASDAQ), equity options and 

warrants, shares of closed-end investment companies, and some convertible 

debt securities. Under Section 13 (f)(3) of the Exchange Act, the Commission is 

responsible for publishing an official list of the securities that must be reported 

pursuant to Section 13(f)(1). Form 13F requires disclosure of the name and 

address of the institutional investment manager filing the report and, for each 

security being reported, specific information, including the name of the issuer, the 

class, the CUSIP1

 number, the number of shares or principal amount, and the 

aggregate fair market value. 

Pursuant to Commission Rule 24b-2, 17 C.F.R. § 240.24b-2, an institutional 

investment manager may request confidential treatment of information required 

to be reported on Form 13F. Section 13(f)(3) of the Exchange Act, 15 U.S.C. § 

78m(f)(3), provides that the Commission may prevent or delay the public 

disclosure of the information reported under Section 13(f)(1) in accordance with 

the Freedom of Information Act (FOIA). Section 13(f)(3) further provides that 

information identifying securities held by the account of a natural person or an 

estate or trust (other than a business trust or investment company) shall not be 

publicly disclosed. The Commission has delegated authority to the SEC’s 

Division of Investment Management (IM) to grant or deny applications for 

confidential treatment pursuant to Section 13(f), and to revoke any grants of 

confidential treatment for such applications. 

Objectives. The Office of Inspector General (OIG) conducted a review in order 

to examine whether the Commission’s implementation of and current practices 

under Section 13(f) meet Congress’s intent in establishing Section 13(f), to 

examine the sufficiency of the Commission’s existing policies and procedures 

that implement Section 13(f), and to determine whether the reporting of entities 

covered under Section 13(f) is appropriately designed to comply with the 

statutory requirements. The objectives also included an examination of whether 

the Commission’s policies and procedures for reviewing and processing requests 

for confidential treatment of information required to be reported under Section 

13(f) are adequate and appropriate. In addition, we performed the review to 

determine whether the oversight over the Section 13(f) process is sufficient. 

1

 According to the Commission’s website, “CUSIP stands for Committee on Uniform Securities Identification 

Procedures. A CUSIP number identifies most securities including: stocks of all registered U.S. and 

Canadian companies, and U.S. government and municipal bonds. The CUSIP system—owned by the 

American Bankers Association and operated by Standard & Poor’s—facilitates the clearing and settlement 

process of securities.” CUSIP Number, http://www.sec.gov/answers/cusip.htm. A CUSIP “number consists 

of nine characters (including letters and numbers) that uniquely identify a company or issuer and the type of 

security.” Id. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

vi 

 

Results. Overall, our review found that significant improvements can be made 

with respect to the SEC’s review and monitoring of the information reported 

under Section 13(f). Significantly, our review found that despite Congressional 

intent that the SEC would be expected to make extensive use of the Section 13(f) 

information for regulatory and oversight purposes, no SEC division or office 

conducts any regular or systematic review of the data filed on Form 13F. We 

found that while IM has delegated authority to grant or deny confidential 

treatment pursuant to Section 13(f), no SEC division or office has been delegated 

authority to review and analyze the 13F reports, and no division or office 

considers this task as falling under its official responsibility. Our review found 

that the information filed on Form 13F can be useful and should be reviewed in a 

routine and systematic manner. 

The OIG’s review also disclosed that no SEC division or office monitors the Form 

13F filings for accuracy and completeness. As a result, many Forms 13F are 

filed with errors or problems, which may not be detected or corrected in a timely 

manner. Because no routine monitoring is conducted, errors or problems with 

the Form 13F filings are typically detected only in connection with IM’s 

processing of Section 13(f) confidential treatment requests (CTRs), or when a 

member of the public notifies IM of an error in or problem with a Form 13F. Our 

review also found that there are no checks built into the EDGAR system, through 

which the Forms 13F are filed, to scan for obvious errors in the forms. Moreover, 

we found that the current text file format of Form 13F limits the facility to extract, 

organize and analyze the data being reported. 

In addition, our review disclosed that a third party prepares the official list of 

Section 13(f) securities that the Commission is required to provide to the public, 

and has been doing so since 1981, based upon specifications received from the 

SEC in 1979. The official list prepared by the third party is posted to the 

Commission’s website each quarter; however, no SEC division or office conducts 

any review of the list for accuracy and completeness before it is posted. We 

believe that such a review is important, given that institutional investment 

managers rely on the official list in preparing their Form 13F reports in 

accordance with Commission Rule 13f-1. We further found that the SEC has no 

contract or agreement with the third party with respect to the preparation of the 

official list of Section 13(f) securities. The lack of a formal contract poses a risk 

to the SEC that the third party could stop preparing the list at any time, and this 

informal arrangement appears to violate the voluntary services prohibition of the 

Antideficiency Act, 13 U.S.C. § 1342. 

The OIG’s testing of a sample of CTRs processed by IM revealed that files and 

supporting documentation could not be located for approximately one-half of the 

CTRs selected in our initial sample of 25 items. When we selected an additional 

12 CTRs, files could not be located for two-thirds of the additional 12 items. The 

missing files raised concerns that confidential information reported on Form 13F 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

vii 

 

could be inadvertently disclosed. Our testing also indicated that the SEC is not 

complying with its records retention schedule for CTRs. In addition, our review 

found that with respect to several CTRs, IM had not rendered a final decision on 

a timely basis, thus affording certain filers de facto confidential treatment of their 

13F reports. 

Finally, our review disclosed that the current Section 13(f) reporting requirements 

are outdated and do not currently require disclosure of all significant activities of 

institutional investment managers, thus rendering the data less useful than it 

could be to investors and regulators. 

Summary of Recommendations. Our review determined that several 

improvements in the Section 13(f) reporting process are needed to ensure, 

consistent with Congress’ intent in enacting this Section, that useful and reliable 

data is provided to the public and government regulators. 

Specifically, we recommend that: 

(1) The Chairman’s Office delegate primary responsibility for 

reviewing and analyzing Form 13F information to the 

appropriate division or office; 

(2) The Chairman’s Office assign to the appropriate divisions or offices 

responsibility for monitoring Section 13(f) filings for accuracy and 

completeness in order to limit the errors in or problems with the 

filings, thereby enhancing the usefulness and reliability of the data; 

(3) IM and the Office of Information Technology (OIT) continue 

previous efforts to implement checks in the EDGAR system to 

detect and/or correct obvious errors in Forms 13F; 

(4) IM, in consultation with the Chairman’s Office, work with OIT to 

pursue updating Form 13F to a more structured format that will 

make the data easier to extract and analyze; 

(5) The Chairman’s Office assign to an appropriate division and/or 

office responsibility for reviewing the official list of Section 13(f) 

securities that is prepared quarterly by a third party and test it on a 

sample basis; 

(6) IM, in consultation with the Office of Administrative Services and 

the Chairman’s Office, ensure that the SEC enters into a formal 

contract or agreement with the third party that prepares the official 

list of Section 13(f) securities; 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

viii 

 

(7) IM and the SEC’s Records Management Branch modify their 

respective policies and procedures to ensure that files for 

processing CTRs are properly maintained and retained in 

accordance with the SEC’s record retention schedule; 

(8) IM, in consultation with the Chairman’s Office, take appropriate 

steps to improve its policies and procedures to ensure that written 

requests for confidential treatment (particularly certain novel 

requests) under Section 13(f) are granted or denied within an 

appropriate time frame so that filers are not afforded de facto

confidential treatment as a result of IM not issuing a written 

response; 

(9) IM, in consultation with the Office of the General Counsel (OGC), 

the Office of International Affairs and the Chairman’s Office, take 

appropriate steps to improve its policies and procedures to ensure 

that requests for relief under Section 13(f) made by certain large 

foreign institutional investment managers are addressed in a timely 

and appropriate manner; 

(10) IM, in consultation with the Division of Risk, Strategy, and Financial 

Innovation (Risk Fin), OGC and the Chairman’s Office, determine 

whether legislative changes to Section 13(f) should be pursued; 

(11) IM, in consultation with the Chairman’s Office, request that Risk Fin 

update its previous analysis of the impact of increasing the Section 

13(f) reporting threshold of $100 million; and 

(12) IM, in consultation with Risk Fin and the Chairman’s Office, 

determine whether to recommend that the Commission adopt a rule 

requiring institutional investment managers to report aggregate 

purchase and aggregate sales of securities under Section 13(f). 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

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TABLE OF CONTENTS 

Executive Summary ............................................................................................

Table of Contents ................................................................................................

Background and Objectives ..............................................................................

Background ...................................................................................................

Objectives ......................................................................................................

Findings and Recommendations ....................................................................

Finding 1: Despite the Intent of Congress in Prescribing the Section 13(f) 

Reporting System that the SEC Would Make Extensive Use of the Section 

13(f) Information for Regulatory and Oversight Purposes, the SEC 

Conducts No Continuous or Systematic Review or Analysis of the Form 

13F Reports ...................................................................................................

Recommendation 1 ...................................................................

Finding 2: The Lack of Monitoring of the Form 13F Information by the 

SEC Renders this Data Less Useful and Reliable than Congress Had 

Intended .........................................................................................................

Recommendation 2 ...................................................................

Finding 3: There Is No Mechanism by Which the SEC Scans for Obvious 

Errors in Forms 13F, Resulting in These Forms Being Uploaded in 

EDGAR with Errors ........................................................................................

Recommendation 3 ...................................................................

Finding 4: The Current Text File Format of Form 13F Limits the 

Usefulness of the Data Reported on the Form ...............................................

Recommendation 4 ...................................................................

Finding 5: The SEC Conducts No Review of the Official List of Section 

13(f) Securities Prepared by a Third Party .....................................................

Recommendation 5 ...................................................................

Finding 6: The SEC Has No Contract with the Third Party that Compiles 

the Official List of Section 13(f) Securities .....................................................

Recommendation 6 ...................................................................

Finding 7: A Majority of the Confidential Treatment Requests that Were 

Selected for Testing Lacked Files with Supporting Documents and Forms ...

Recommendation 7 ...................................................................

... iv 

... ix 

.... 1 

.... 1 

.... 5 

.... 6 

.... 6 

.... 9 

.... 9 

.. 12 

.. 12 

.. 13 

.. 13 

.. 15 

.. 15 

.. 17 

.. 17 

.. 19 

.. 19 

.. 21 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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Finding 8: Certain Filers Received De Facto Confidential Treatment Even

Though Their Applications Did Not Meet the Criteria for Confidential 

Treatment Under Section 13(f) ....................................................................

.

.

.

.

.

.

.

.

.

.

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..... 21 

..... 25 

..... 25 

..... 25 

..... 27 

..... 28 

..... 28 

..... 29 

..... 30 

..... 32 

..... 34 

..... 37 

..... 45 

Recommendation 8 ...............................................................

Recommendation 9 ...............................................................

Finding 9: Form 13F Does Not Currently Require Disclosure of All 

Significant Investment Activities of Institutional Investment Managers and

Could Be Improved ....................................................................................

Recommendation 10 .............................................................

Recommendation 11 .............................................................

Recommendation 12 .............................................................

ndices 

Appendix I: Acronyms. ..............................................................................

Appendix II: Scope and Methodology ........................................................

Appendix III: Criteria ..................................................................................

Appendix IV: List of Recommendations ....................................................

Appendix V: Management Comments .......................................................

Appendix VI: OIG Response to Management’s Comments.......................

Appe
Background and Objectives 

Background 

Section 13(f) Reporting Requirement 

Congress adopted Section 13(f) of the Securities Exchange Act of 1934 

(Exchange Act), 15 U.S.C. § 78m(f), as part of the Securities Acts Amendments 

of 1975. According to the Securities and Exchange Commission (SEC or the 

Commission), this Section required a reporting system that was “intended to 

create in the Commission a central repository of historical and current data about 

the investment activities of institutional investment managers,” thereby advancing 

two separate objectives.2 First, the reporting system was “designed to improve 

the body of factual data available and, thus, facilitate consideration of the 

influence and impact of institutional investment managers on the securities 

markets and the public policy implications of that influence.”3

 Second, “by 

making the Commission responsible for all gathering, processing, and 

dissemination of the data, Congress intended to permit establishment of uniform 

reporting standards and a centralized data base.”4 The legislative history for 

Section 13(f) indicates that Congress believed that the dissemination of data 

about institutional investment managers would “stimulate a higher degree of 

confidence among all investors in the integrity of [the U.S.] securities markets.”5 

Congress also believed that the institutional disclosure data would be used 

extensively by government agencies, including the SEC, in fulfilling their 

regulatory responsibilities.6

Specifically, Section 13(f)(1) requires that institutional investment managers that 

exercise investment discretion with respect to accounts holding equity securities 

of a class described in Section 13(d)(1) of the Exchange Act having an aggregate 

fair market value of at least $100,000,000 (or a lesser amount that the 

Commission may by rule determine but in no case less than $10,000,000) “shall 

file reports with the Commission, in such form, for such periods, and at such 

times after the end of such periods as the Commission, by rule, may prescribe, 

 

2

 Filing and Reporting Requirements Relating to Institutional Investment Managers, Release No. 34-14852 

(June 15, 1978), 43 Fed. Reg. 26700, 26701 (June 22, 1978). 

3 Id. 4 Id. (citing Report of the Senate Comm. on Banking, Housing, and Urban Affairs, Senate Report No. 75, 

94th Cong. 1st Sess. 85 (1975)). 5

 Report of Senate Comm. on Banking, Housing and Urban Affairs, S. Rep. No. 94-75 at 78 (1975), 

reprinted in 1975 U.S.C.C.A.N. 179, 261. See also Division of Investment Management: Frequently Asked 

Questions About Form 13F (May 2005)(Frequently Asked Questions), http://www.sec.gov/divsions 

/investment/13ffaq.htm, Question 1 at p.1 (“Congress believed that this institutional disclosure program 

would increase investor confidence in the integrity of the United States securities markets.”). 6

 Report of Senate Comm. on Banking, Housing and Urban Affairs, S. Rep. No. 94-75 at 79 (1975), 

reprinted in 1975 U.S.C.C.A.N. 179, 261. 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

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Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

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but in no event shall such reports be filed for periods longer than one year or 

shorter than one quarter.”7

 For each equity security held on the last day of the 

reporting period with respect to which the institutional investment manager 

exercises investment discretion (other than securities held in amounts the 

Commission, by rule, determines to be insignificant), the following information 

must be reported: “the name of the issuer and the title, class, CUSIP number, 

number of shares or principal amount, and aggregate fair market value of each 

such security.”8 

The Commission’s website describes an “institutional investment manager” as 

follows: 

In general, an institutional investment manager is: (1) an entity that 

invests in, or buys and sells, securities for its own account; or (2) a 

person or an entity that exercises investment discretion over the 

account of any other person or entity. Institutional investment 

managers can include investment advisers, banks, insurance 

companies, broker-dealers, pension funds, and corporations.9 

With regard to the term “investment discretion,” Division of Investment 

Management’s (IM) Frequently Asked Questions (FAQs) About Form 13F state 

that “[a]n institutional investment manager exercises investment discretion if: 

(i) the manager has the power to determine which securities are bought or sold 

for the account(s) under management; or (ii) the manager makes decisions about 

which securities are bought or sold for the account(s), even though someone 

else is responsible for the investment decisions.”10

 

The securities that must be reported pursuant to Section 13(f), i.e., Section 13(f) 

securities, “generally include equity securities that trade on an exchange or are 

quoted on the Nasdaq National Market, some equity options and warrants, 

shares of closed-end investment companies, and some convertible debt 

securities;” however, “[t]he shares of open-end investment companies (i.e.,

mutual funds) are not Section 13(f) securities.”11 The securities that must be 

reported are those contained in an official list of securities that the Commission is 

required to make available to the public for a reasonable fee and update no less 

frequently than reports are required to be filed pursuant to Section 13(f)(1).12 

7

 15 U.S.C. § 78m(f)(1). 

8 Id. Section 13(f)(1) also list other information that the Commission may, by rule, require to be reported for 

accounts with respect to which the institutional investment manager exercises investment discretion. 9

 Form 13F—Reports Filed by Institutional Investment Managers, http://www.sec.gov/answers/form13f.htm. 

See also Frequently Asked Questions, Question 3 at pp. 1-2. 10 Frequently Asked Questions, Question 6 at p. 3 (citing Section 3(a)(35) of the Exchange Act and 

Commission Rule 13f-1(b)). 

11 Form 13F—Reports Filed by Institutional Investment Managers, http://www.sec.gov/answers/form13f.htm. 

See also Frequently Asked Questions, Question 7 at p. 3. 12 15 U.S.C. § 78m(f)(3); see also 17 C.F.R. § 240.13f-1(c). 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

3 

rity.”

 

Commission Rule 13f-1 requires that institutional investment managers that 

exercise investment discretion with respect to accounts holding Section 13(f) 

securities having an aggregate fair market value on the last trading day of any 

month of a calendar year of at least $100 million file a report with the 

Commission on Form 13F within 45 days after the end of the calendar year, and 

within 45 days after the end of the first three quarters of the subsequent calendar 

year.13 According to the Commission’s website, “Form 13F requires disclosure 

of the names of institutional investment managers, the names of the securities 

they manage and the class of securities, the CUSIP number, the number of 

shares owned, and the total market value of each secu 14

Form 13F must be filed electronically using the Commission’s EDGAR system; 

paper filings are only permitted if the filer has been granted a hardship 

exemption.15 Form 13F consists of three separate parts: a cover page, a 

summary page, and an information table (which contains the reportable 

information for the Section 13F securities).16 There are three different types of 

Form 13F reports: a 13F Holdings Report (used if all of an institutional 

investment manager’s Section 13(f) securities are listed on its Form 13F); a 13F 

Combination Report (used if some of the institutional investment manager’s 

Section 13(f) securities are listed on its Form 13F, and the rest are listed on 

someone else’s Form 13F; and a 13F Notice (used if all of the institutional 

investment manager’s Section 13(f) securities are reported on someone else’s 

Form 13F).17 

Section 13(f) Confidential Treatment Requests 

Confidential treatment is available for information required to be reported under 

Section 13(f) under certain circumstances. According to guidance issued by IM, 

while Congress intended for the Section 13(f) information to be promptly 

disseminated to the public, it also recognized that, in some instances, disclosure 

of certain information could have harmful effects, both on an institutional 

investment manager and on the investors whose assets are under its 

management.18 Accordingly, “[t]o balance these competing interests, Section 

13(f)(3) authorizes the Commission to delay or prevent the public disclosure of 

13 17 C.F.R. § 13f-1(a). See also Frequently Asked Questions, Question 28 at p. 8 (noting that an 

institutional investment manager should file its first Form 13F for the December quarter for the calendar 

during which it first reaches the $100 million filing threshold, and will then need to submit filings for the 

March, June, and September quarters of the following calendar year, even if the market value of its Section 

13(f) securities falls below the $100 million level). 

14 Form 13F—Reports Filed by Institutional Investment Managers, http://www.sec.gov/answers/form13f.htm. 

See also Frequently Asked Questions, Question 8 at pp. 3-4. 15 Frequently Asked Questions, Questions 13 and 14 at p. 5. 16 Frequently Asked Questions, Question 31 at p. 9. 17 Frequently Asked Questions, Question 33 at p. 9. 18 Letter from Douglas Scheidt, Associate Director and Chief Counsel, Division of Investment Management 

to Section 13(f) Confidential Treatment Filers (June 17, 1998)(Scheidt Letter), 

http://www.sec.gov/divisions/investment/guidance/13fpt2.htm, at p. 2. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

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information as it determines to be necessary or appropriate in the public interest 

or for the protection of investors.”19 

Section 13(f)(3) allows for confidential treatment of information required to be 

filed under that Section in two respects. First, Section 13(f)(3) provides that “the 

Commission, as it determines to be necessary or appropriate in the public 

interest or for the protection of investors, may delay or prevent public disclosure 

of any . . . information [filed in reports required by Section 13(f)] in accordance 

with section 552 of Title 5 [the Freedom of Information Act (FOIA)].”20 According 

to the IM’s FAQs About Form 13F, “[a]t a minimum, requests for confidential 

information must satisfy the requirements of FOIA Exemption 4 which protects 

‘trade secrets and commercial or financial information obtained from a person 

and privileged or confidential.’”21

Second, Section 13(f)(3) further provides that “[n]otwithstanding the preceding 

sentence, any such information identifying the securities held by the account of a 

natural person or an estate or trust (other than a business trust or investment 

company) shall not be disclosed to the public.”22 This category of confidential 

information is referred to as the “personal holdings exemption.”23 Confidential 

treatment based on the personal holdings exemption lasts indefinitely, although 

the filer may not “always receive confidential treatment because changed 

circumstances may make the personal holding exemption inapplicable.”24

CTRs must be made in accordance with Rule 101(c)(1)(i) of Regulation S-T,25

and the Confidential Treatment Instructions 1 and 2 to Form 13F. In addition, 

confidential treatment applications must follow the procedural requirements 

contained in Rule 24b-2 under the Exchange Act.26 CTRs must be submitted in 

paper, although the filer must still submit the public Form 13F electronically via 

EDGAR, omitting the information for which confidential treatment is sought.27 

The Commission has delegated to the Director of IM the authority to grant or 

deny applications for confidential treatment of information filed under Section 

13(f), and to revoke a grant of confidential treatment for any such application.28 

19 Id. 20 15 U.S.C. § 78m(f)(3). 21 Frequently Asked Questions, Question 52 at pp. 14-15 (quoting 5 U.S.C. § 552(b)(4)). 22 15 U.S.C. § 78m(f)(3). 23 Frequently Asked Questions, Question 52 at p. 14. 24 Id., Question 55a at p. 16. 25 17 C.F.R. § 232.101(c)(i). This rule requires that CTRs, and the information with respect to which 

confidential treatment is sought, be filed in paper form only. 

26 17 C.F.R. §240.24b-2. Under this rule, an application for confidential treatment must include, among 

other things, an analysis of the applicable exemption(s) from disclosure under the Commission’s rules and 

regulations adopted under the FOIA, and a justification of the time period for which confidential treatment is 

sought. 

27 Frequently Asked Questions, Question 53 at p. 15. See also Form 13F, Instructions for Confidential 

Treatment Requests at p. 2. 

28 17 C.F.R. § 200.30-5(c)(1) and (2). 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

5 

IM has put in place well-constructed review procedures for processing CTRs, 

especially in novel or complicated cases involving ongoing investment strategies 

for acquisitions and dispositions. IM carefully reviews the information the filers 

provide as a basis for seeking confidential treatment and researches public data 

in order to validate the basis provided by the filer. 

Additionally, IM’s procedures appropriately provide for the assignment of CTR 

applications to the pertinent staff, and for the proper supervision of those staff. 

Specifically, CTR applications are reviewed by IM attorneys, who are each 

assigned the applications of a number of institutional investment managers. This 

practice allows continuity and enables the attorney to build rapport with the filers. 

More complicated requests are assigned to senior attorneys, while routine 

requests, such as personal holdings exemption requests, are assigned to new 

attorneys or paralegal specialists. The IM attorneys who work on CTRs are 

generally knowledgeable of the confidential treatment process and encouraged 

to consult with one another and their supervisors. Further, an IM Branch Chief 

reviews all CTRs, except for personal holdings exemption requests that have 

been granted in the past. An IM Assistant Director and the Chief Counsel review 

the CTRs and response letter in certain novel cases, and the Chief Counsel 

reviews all denial letters and any appeals filed by the institutional investment 

managers. 

Objectives 

 

The objectives of the review were to examine whether the Commission’s 

implementation of and current practices under Section 13(f) meet Congress’s 

intent in establishing Section 13(f), to examine the sufficiency of the 

Commission’s existing policies and procedures that implement Section 13(f), and 

to determine whether the reporting of entities covered under Section 13(f) is 

appropriately designed to comply with the statutory requirements. The objectives 

also included an examination of whether the Commission’s policies and 

procedures for reviewing and processing requests for confidential treatment of 

information required to be reported under Section 13(f) are adequate and 

appropriate. In addition, we performed the review to determine whether the 

oversight over the Section 13(f) process is sufficient. 
Findings and Recommendations 

Finding 1: Despite the Intent of Congress in 

Prescribing the Section 13(f) Reporting 

System that the SEC Would Make Extensive 

Use of the Section 13(f) Information for 

Regulatory and Oversight Purposes, the SEC 

Conducts No Continuous or Systematic 

Review or Analysis of the Form 13F Reports 

No SEC division or office has been delegated authority to 

review the Section 13(f) reports, and no regular or 

systematic review or analysis of this information is 

conducted. 

Section 13(f)(3) requires the Commission to tabulate the information contained in 

any reports filed pursuant to Section 13(f) “in a manner which will, in the view of 

the Commission, maximize the usefulness of the information to other Federal and 

State authorities and the public.”29 That subsection further requires the 

Commission to make this information available to the public for a reasonable fee 

in such form as the Commission, by rule, may prescribe, except where the 

Commission determines that information should be afforded confidential 

treatment.30

Consistent with the statutory language, the legislative history for Section 13(f) 

makes clear that Congress anticipated that regulatory agencies, including the 

SEC, would be expected to make extensive use of the information required to be 

disclosed under Section 13(f). That legislative history stated, in part, as follows: 

Moreover, the SEC, bank regulatory agencies, and other agencies 

(both federal and state) could be expected to make extensive use 

of the institutional disclosure data in fulfilling their responsibilities to 

consider and develop standards designed to protect the public 

interest within a consistent and coordinated regulatory framework. 

It would be expected that the SEC might use the institutional 

disclosure data in generally two different ways: to analyze the 

characteristics of institutional investment managers, and to analyze 

 

29 15 U.S.C. § 78m(f)(3). 30 Id. 

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Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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the impact of institutional investment managers on the securities 

markets.31

The Commission itself has recognized in various orders it has issued that “[t]he 

legislative history of [S]ection 13(f) suggests that the provision was designed to 

further regulatory and policymaking uses of the information, as well as to 

contribute to the transparency and integrity of, and investor confidence, in the 

U.S. equity markets.”32 In addition, in a cease-and-desist proceeding involving a 

hedge fund’s repeated failure to file Forms 13F, the Commission noted the 

current importance of Section 13(f) information as follows:

The information is valuable to the Commission because it 

“facilitate[s] consideration of the influence and impact of institutional 

investment managers on the securities markets and the public 

policy implications of that influence.” Reporting by Institutional 

Investment Managers of Information With Respect To Accounts 

Over Which Investment Discretion is Exercised, Release No. 34-

13396, at 1 (Mar. 22, 1977). The need for such information in 

the regulatory oversight of market practices is at least as 

acute today, when institutional investment managers oversee 

in excess of $1 trillion of hedge fund investments, as it was in 

1975 when Section 13(f) was enacted.33 

Moreover, the Commission has represented that the Commission staff is using 

Section 13(f) information for a variety of regulatory purposes, stating as follows: 

The information collected on Forms 13F has been and continues to 

be used by U.S. regulators, academics, the media and financial 

information distributors, and investors, and other U.S. equity 

markets participants, as intended by Congress. The Commission’s 

staff use Form 13F information for a variety of research, oversight, 

and enforcement purposes. The Commission’s staff also use 

Form 13F-based academic research, for example, to analyze the 

Commission’s rulemaking initiatives under the federal securities 

laws.34

 

31 Report of Senate Comm. on Banking, Housing and Urban Affairs, S. Rep. No. 94-75 at 79 (1975), 

reprinted in 1975 U.S.C.C.A.N. 179, 261. 32 In re Wynnefield Capital Management LLC and Wynnefield Capital, Inc., Release No. 34-61930 (Apr. 16, 

2010), at 1-2 (citing S. Rep. No. 75 at 80-84); In re Full Value Advisors, LLC, Release No. 34-61327 (Jan. 

11, 2010) at 2 (same citation). See also In re Quattro Global Capital, LLC, Release No. 34-56252 (Aug. 15, 

2007), at 2 (“The Congressional purpose in enacting Section 13(f) of the Exchange Act was ‘to create a 

central depository of historical and current data about the investment activities of institutional investment 

managers’ to assist investors and government regulators.” (quoting S. Rep. No. 94-75, 94th Cong., 2d [sic] 

Sess. 82-85 (1975)). 

33 In re Quattro Global Capital, LLC, Release No. 34-56252 (Aug. 15, 2007), at 2-3 (emphasis supplied). 34 In re Full Value Advisors, LLC, Release No. 34-61327 (Jan. 11, 2010), at 4 (footnote omitted). 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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Our review found that, despite the statements above concerning the use of Form 

13F information for a variety of oversight and other purposes, the SEC does not, 

in fact, conduct any continuous or systematic review or analysis of that 

information. As noted above, the Director of IM has been delegated authority to 

grant or deny applications for confidential treatment of information filed under 

Section 13(f), and to revoke a grant of confidential treatment for any such 

application. However, no Commission division or office has been delegated 

authority to review the Form 13F filings. As a consequence, no SEC division or 

office considers reviewing Form 13F as falling under its official responsibility, and 

no division or office conducts such a review on a systematic or ongoing basis. 

IM management informed us that the “oversight” uses referred to in the 

Commission order described above referred to the review of certain Forms 13F 

performed by other Commission divisions or offices. IM stated its belief that the 

Office of Compliance Inspections and Examinations (OCIE), during its periodic 

examinations and surveillance, checks to see whether a registered investment 

adviser or broker-dealer files Form 13F, but generally does not substantively 

review the Form 13F reports that such registrant files. Our review found that only 

in rare occasions would Forms 13F be reviewed during OCIE Examinations. 

While OCIE on occasion encounters instances when registered entities that 

should have filed Form 13F failed to do so, these instances are infrequent 

because compliance with Section 13(f) is not the focus of OCIE’s examinations of 

registered entities, and OCIE lacks jurisdiction over institutional investment 

managers that are not registered.35 

Our review also disclosed that Risk Fin economists have used Form 13 F data to 

conduct analyses,36 and that SEC staff use Form 13F data to inform 

Commission rule making.37 In addition, Risk Fin pointed out that Commission 

staff routinely use Form 13F data to formulate penalty recommendations in 

corporate fraud cases. Nonetheless, there is no systematic review or analysis of 

Form 13F data being conducted. One Risk Fin staff member expressed the 

belief that the data in Form 13F filings is useful to research the holdings of large 

institutional investment managers in particular, as the large managers have the 

resources and knowledge to report Form 13F data correctly.38 

A Risk Fin staff member provided an example of useful information that may be 

provided by review and analysis of the information filed on Form 13F. In that 

instance, a Risk Fin employee who was conducting research on the valuation of 

35 OCIE staff estimated that they find issues with Form 13F in less than 5 percent of OCIE’s examinations. 36 According to Risk Fin, Form 13F data have formed the basis of numerous academic studies, some of 

which were conducted by economists at the SEC and some of which were prepared by economists working 

outside the SEC. Risk Fin stated that the SEC staff regularly rely on economic research of this nature. 37 Risk Fin cited the proxy access rule as a recent example of Form 13F data being used to support a 

rulemaking. See Facilitating Shareholder Director Nominations, File No. S7-10-09 (Aug. 25, 2010). 38 This Risk Fin staff member indicated that errors in Form 13F filings (see Findings 2 and 3) appeared to be 

more prevalent in the filings of small managers who have less resources and expertise. 
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9 

warrants noted a zero value for certain warrants reported by institutional 

investment managers on Form 13F. The Risk Fin employee contacted OCIE, 

which reviewed Form 13F filings to determine the valuation of similar warrants 

and determined that institutional investment managers reported different values 

for the same warrants. OCIE is in the process of obtaining supporting 

documentation from registered filers and plans to contact the Division of Trading 

and Markets in an effort to obtain similar information from non-registrants. IM 

staff acknowledged that the valuation of warrants would be materially important, 

for example, if it were to impact whether an institutional investment manager has 

exceeded the Section 13(f) reporting threshold of $100 million. In addition, IM 

indicated that research into the methodology used to value the warrants might 

reveal that one model is better than other models, such that IM might wish to 

notify certain institutional investment managers of the preferred methodology. 

Our review concluded, therefore, that a systematic review of Form 13F 

information can provide valuable information and should be conducted to ensure 

that the SEC is making the maximum use of the Form 13F information, 

consistent with the intent of Congress. 

Recommendation 1: 

The Chairman’s Office should delegate primary responsibility for reviewing 

and analyzing Form 13F information to the appropriate division or office. 

Management Comments. The Chairman’s Office concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased that the Chairman’s Office concurred with 

this recommendation. 

Finding 2: The Lack of Monitoring of the 

Form 13F information by the SEC Renders 

this Data Less Useful and Reliable than 

Congress Had Intended

There is no periodic monitoring of the Section 13(f) reporting 

process, including no review of the Form 13F filings for

accuracy and completeness. 

As mentioned in Finding 1, the OIG review has found that no Commission 

division or office is responsible for reviewing Form 13F filings and that, as a 

consequence, no systematic review of the Form 13F filings is conducted. The 

OIG review also found that the SEC conducts no periodic monitoring of the Form 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

10 

 

13F filings to ensure the accuracy and completeness of the information that is 

reported. As a general matter, apart from the review of Form 13F as a result of 

an institutional investment manager’s request for confidential treatment of Form 

13F information, the majority of the monitoring or checking of this information by 

IM is performed only after a member of the public notifies IM of an error in or 

problem with a Form 13F, or IM receives a referral from another SEC division or 

office. 

Further, as discussed above, our review found that only on rare occasions during 

examinations does OCIE identify entities subject to 13(f) that failed to file the 

required reports. On these very few occasions, OCIE issues a deficiency letter, 

requesting that the entity file the required Form 13F. The entity then typically 

sends a written response to the examination team and makes the necessary 

filing(s) or amended filing(s). The examination team then checks in EDGAR to 

ensure that the required filing or filings were made. However, no continuous 

monitoring is performed to ensure that the entities that failed to file Form 13F 

make the required filings in the future, and OCIE does not notify IM of these 

situations.39

IM’s Current Procedures for Addressing Errors in or Problems 

with Forms 13F 

We found in our review that IM has no formal procedures for monitoring or 

checking the Form 13F filings, as IM’s Section 13(f) work focuses almost 

exclusively on CTRs. Apart from the reviews of Forms 13F conducted pertinent 

to the review of CTRs, the only examination of the Form 13F filings we identified 

was the informal work of one paralegal specialist in IM, who primarily collects 

information from entities or individuals outside of the Commission about errors 

with the Form 13F filings. According to this one paralegal specialist, while she 

does not conduct any systematic monitoring or checking of the forms, members 

of the public, including certain research centers, graduate students, individual 

researchers, academia, investors, and financial institutions periodically review 

Form 13F filings and notify her of issues or problems identified with the filings. In 

addition, on occasion, errors in or problems with Form 13F are identified as a 

result of filers contacting the paralegal requesting assistance on other issues, or 

by staff in IM or other SEC divisions or offices who are performing other work.40

We found that the errors or problems identified with Form 13F filings are not 

infrequent. The paralegal indicated that she receives approximately 20 to 25 

calls a week near the time period when quarterly filings are due and posted on 

39 IM staff believe that OCIE should monitor these entities and their filings, since IM is not responsible for 

reviewing Forms 13F apart from assessing CTRs, and the failure to file the Form 13F was detected through 

an OCIE examination. 

40 According to the paralegal, the public identified about 70 percent of the Form 13F issues brought to her 

attention, while the remaining 30 percent are discovered in working with filers or by Commission staff. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

11 

the SEC’s website. The paralegal specialist maintains e-mails and logs of calls 

from the public on issues with certain Form 13F filings and researches the issues 

or follows up with the institutional investment managers. She enters complicated 

issues related to Section 13(f) CTRs and errors in Form 13F filings in IM’s Office 

of Chief Counsel’s internal database. However, our review found that complaints 

and issues noted by the public regarding Form 13F filings are not separately 

identified in the database. 

The paralegal specialist indicated that she attempts to correct the errors or 

problems that are identified through an informal process. This process includes 

contacting the institutional investment managers, notifying them of the 

deficiencies or errors identified, and setting a general time table to address the 

issues. However, according to the paralegal specialist, issues identified with 

Form 13F filings may take many months to resolve, as the errors or problems 

identified may cover many quarterly filings. 

Examples of the Errors in or Problems Related to the Form 13F 

Filings 

Based upon the number of issues identified with the Form 13F filings, including 

those found by entities outside the SEC and the lack of any formal or systematic 

monitoring by the SEC, the review has determined that the public may not always 

be obtaining accurate and complete data, or the most useful information, on 

Form 13F. Our review of IM’s log and supporting documents revealed the 

following examples of concerns with or errors in certain Form 13F filings that 

were identified by the public: 

• A graduate student regularly reviewed Form 13F filings and 

informed the IM paralegal specialist of numerous issues, including 

those relating to the Form 13F of a particular bank. In that 

instance, the bank used an expired Form 13F in paper format, 

rather than the EDGAR form that became available in 1999. IM’s 

inquiry of the bank revealed that the bank had been using the old 

form since it began filing Form 13F and had not previously been 

notified of the error. 

• An employee from a stock research firm notified IM that a European 

bank affiliate operating in the United States did not file Form 13F for 

the period ended December 31, 2009. When the paralegal 

specialist contacted the U.S. bank, she was informed that its 

holdings were now aggregated with those of the European bank. 

However, the European bank had also not filed Form 13F. 

According to IM, the filing deficiencies with respect to such 

European bank and its U.S. affiliate have been corrected as of June 

14, 2010 (after the commencement of our fieldwork). 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

12 

Our review disclosed that as of June 7, 2010, the paralegal specialist was 

working on approximately 22 cases involving issues with Form 13F that were 

noted by the public and had not been fully addressed. A formalized process for 

systematic monitoring of Form 13F, even if merely on a test basis, would detect 

errors or other issues and problems with Form 13F and ensure that these types 

of issues are addressed and corrected on a timelier basis. As a consequence, 

the public would be provided with more accurate, complete and useful 

information, consistent with the intent of Congress in enacting Section 13(f). 

While the OIG acknowledges that it would be too cumbersome and timeconsuming to perform a review of every Form 13F (in its current form), as there 

are at least 3,000 to 4,000 filers each quarter, the SEC could audit the Form 13F 

files of a sample of filers and review the Form 13F filings of new filers. 

Recommendation 2: 

The Chairman’s Office should assign to the appropriate divisions or 

offices responsibility for monitoring Section 13(f) filings for accuracy and 

completeness in order to limit the errors in or problems with the filings and 

thereby enhance the usefulness and reliability of the data. 

Management Comments. The Chairman’s Office concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are please that the Chairman’s Office concurred with 

this recommendation. 

Finding 3: There Is No Mechanism by Which 

the SEC Scans for Obvious Errors in Forms 

13F, Resulting in These Forms Being 

Uploaded in EDGAR with Errors 

Currently, the Forms 13F that are uploaded through EDGAR 

are not scanned for obvious errors. Therefore, there is no 

system in place to limit the amount of errors contained on 

the forms. 

In addition to the lack of monitoring of Form 13F (see Finding 2 above), the SEC 

has not implemented any tool to scan for and/or correct obvious errors on Form 

13F. As noted above, errors on Forms 13F are generally only detected if they 

are identified by the public or noted by IM during its review of CTRs. Moreover, 

the errors that are identified are often not corrected on a timely basis. As a result 

of the errors on the Forms 13F, the benefits of the reporting system are 

minimized. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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In connection with discussions regarding the possible modernization of Form 13F 

that took place in 2005 but were not pursued (see Finding 4 below), OIT, in 

consultation with IM, prepared a document detailing the types of errors that might 

be made in filing Form 13F (e.g., failing to complete a required field, entering a 

date in an improper format) and possible help messages for those errors. These 

efforts should be pursued and checks should be implemented in EDGAR to 

prevent incomplete or plainly erroneous filings from being submitted, such as 

filings that are inadvertently dated far into the future or contain mismatched or 

inappropriate table alignments. In addition, other measures should be taken to 

scan for and/or correct readily identifiable errors on the Forms 13F that are filed 

through EDGAR. 

Recommendation 3: 

The Division of Investment Management and the Office of Information 

Technology should renew the efforts that were begun in 2005 and 

implement checks in the Electronic Data Gathering and Retrieval 

(EDGAR) system that will detect and/or correct obvious errors contained 

in the Forms 13F that are uploaded in EDGAR. 

Management Comments. IM and OIT concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased that IM and OIT concurred with this 

recommendation.

Finding 4: The Current Text File Format of 

Form 13F Limits the Usefulness of the Data 

Reported on the Form 

The data submitted on the current electronic Form 13F is 

difficult to analyze and manipulate due to the text file format of 

Form 13F and the lack of uniformity in reporting data on the 

form. 

Form 13F was initially submitted in paper format. During a phase-in to 

mandatory electronic filing, the Commission permitted institutional investment 

managers to report their holdings electronically on former Form 13F-E, on a 

voluntary basis.41 In January 1999, the Commission adopted amendments to 

mandate the electronic filing of Form 13F using the EDGAR system.42 Effective 

41 Final Rule: Rulemaking for EDGAR System, Release No. 34-40934 (Jan. 12, 1999), 

http://www.sec.gov/rules/final/34-40934.htm, at p. 2. 42 Id. at pp. 1-2. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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April 1, 1999, institutional investment managers were required to file Form 13F 

electronically on EDGAR.43 

At the time electronic submission of Form 13F on EDGAR became mandatory in 

1999, the SEC decided to use a text file format for Form 13F. EDGAR imposes a 

maximum line length of 132 characters, thus limiting the amount of information 

that can be submitted on a line. In addition, IM staff indicated the text file format 

of Form 13F limits its usefulness because the data is not manageable and cannot 

be easily analyzed. 

Our review also found that the text format of Form 13F limits the ability of other 

SEC divisions and offices to utilize the information effectively. For example, one 

Risk Fin staff member observed that Form 13F should be submitted in machinereadable form instead of an unformatted text file. This is because data submitted 

on Form 13F cannot easily be aggregated across filers or merged with other data 

sets due to the limitations on the text file format of Form 13F and the lack of 

universal identifiers for the filers. The Risk Fin staff member believes that if Form 

13F filings were in a tagged format, various users, individual researchers and 

data vendors would be able to extract and merge Form 13F data into a single 

database. Risk Fin pointed out, however, that some third-party providers make 

Form 13F data available in a standardized format that is readily usable by Risk 

Fin economists. 

In addition, we found that OCIE sometimes uses Form 13F data in its 

examinations of investment advisers. An OCIE staff member who is familiar with 

Form 13F noted that the current EDGAR text file makes it nearly impossible to 

manipulate the data in order to perform comparison analysis or data mining 

because the data in the text file must be entered into an Excel spreadsheet or 

another similar format. Our review also found that while filers are assigned an 

identification number for use when filing Form 13F, they do not always include 

the identification number on the form. In addition, Form 13F does not require 

filers to note their Central Index Key numbers, which identify corporations and/or 

individuals that have submitted disclosure filings with the SEC. The absence of 

identification numbers makes it difficult for users to identify particular entities and 

compare data submitted on Form 13F with information submitted on other types 

of SEC filings. 

We learned through discussions with IM and OIT staff that in or about 2005, IM 

explored with OIT the possibility of modernizing the format of Form 13F. 

Specifically, IM and OIT discussed changing the text file format of Form 13F to a 

more structured format that would use an Extensible Markup Language (XML) 

form44 and would be posted on the SEC’s website. However, OIT staff informed 

43 Id. at p. 1. 44 XML is a set of rules for encoding documents in machine-readable form; it is a textual data format that is 

widely used in web services. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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15 

 

us that due to other priorities, such as former Chairman Christopher Cox’s efforts 

to use XBRL (Extensible Business Reporting Language) for company filings, the 

Form 13F project was never completed. OIT staff indicated that the project delay 

was not a result of funding issues, as converting Form 13F to XML would not 

have been very costly. 

OIT staff further stated that they have retained requirements documentation from 

their meetings with IM in 2005. OIT also indicated that it would be possible to 

pursue this project further if IM is still interested in changing the format of Form 

13F. However, based upon the resources that are currently available, OIT has 

stated that the earliest it could pursue this project actively would be in March 

2011. 

Recommendation 4: 

The Division of Investment Management, in consultation with the 

Chairman’s Office, should work with the Office of Information Technology 

and update Form 13F to a more structured format, such as Extensible 

Markup Language (XML), to make it easier for users and researchers to 

extract and analyze Section 13(f) data. 

Management Comments. IM concurred with this recommendation. See 

Appendix V for management’s full comments. 

OIG Analysis. We are pleased that IM concurred with this 

recommendation. 

Finding 5: The SEC Conducts No Review of 

the Official List of Section 13(f) Securities 

Prepared by a Third Party 

A third party prepares the official list of securities that is 

required by Section 13(f)(3) by searching relevant databases 

based upon criteria the SEC provided. The SEC performs 

no review of the list and does not monitor it for accuracy and 

completeness. 

Section 13(f)(3) requires that “[t]he Commission shall make available to the 

public for a reasonable fee a list of all equity securities of a class described in 

[Section 13(d)(1)], updated no less frequently than reports are required to be filed 

pursuant to [Section 13(f)(1)].”45 The “Official List of Section 13(f) Securities” is 

45 15 U.S.C. § 78m(f)(3). 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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es shall be reported.

 

published on the SEC’s website on a quarterly basis.46 Section 13(f) securities 

are equity securities that are described in Section 13(d)(1) of the Exchange 

Act.47 Under Commission Rule 13f-1(c), “[i]n determining what classes of 

securities are section 13(f) securities, an institutional investment manager may 

rely on the most recent list of such securities published by the Commission 

pursuant to [Section 13(f)(3)].”48 Only securities of a class included on the list

shall be counted in determining whether an institutional investment manager 

must file a 13(f) report, and only those securiti 49

Our review disclosed that a third party prepares and maintains the official list of 

Section 13(f) securities, without any review by SEC staff. The third party that 

prepares and maintains the list informed us that it has provided the official list to 

the SEC quarterly via FTP transmission50 (on the 15th of each December, March, 

June and September) since 1981, based upon specifications originally provided 

by the SEC in 1979. Hence, a security that qualifies as a Section 13(f) reporting 

security in the last two weeks of a quarter will be included in the official list for the 

following quarter. 

The third party informed us that it prepares the list quarterly by electronically 

screening its relevant databases for securities that match the categories provided 

by the SEC, which include: (1) common stocks or similar securities, 

(2) convertible preference stocks or preferred stocks, (3) convertible bonds, 

(4) warrants or rights to purchase common stocks, and (5) options. The third 

party collects and maintains securities reference data on a daily basis from direct 

and indirect sources, including exchange feeds, public filings, agency 

information, prospectuses and official statements, government filings, outside 

vendors, investment publications and direct issuer sources. The third party 

stated that it performs quality assurance on the databases used to prepare the 

official list daily, through the use of measures such edit checks, statistical 

sampling and change reports. 

In order to assess whether the third party has proper controls and processes in 

place for producing the official listing of Section 13(f) securities, the OIG 

requested a copy of its Statement of Auditing Standards (SAS) 70 Report Type II, 

which is an audited report on internal controls and processes prepared by an 

independent auditor. The third party informed us that its processes and controls 

are not currently audited by an independent auditor and, therefore, it had no SAS 

70 Report Type II. 

OIT staff stated that the third party sends the official list on approximately the 18th

of the last month of the quarter and that OIT generally posts the official list on the 

46 See http://www.sec.gov/divisions/investment/13flists.htm. 47 Frequently Asked Questions, Question 7 at p. 3. 48 17 C.F.R. § 240.13f-1(c). 49 Id. 50 FTP (File Transfer Protocol) is a standard network protocol used to copy files from one host to another. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

17 

SEC website by the eighth day of the following month. OIT has read-only access 

to the FTP transmission, and OIT does not compare the data received from the 

third party with any other information or otherwise review it or check it for 

accuracy. OIT staff indicated that if there is an issue with the official list (e.g., a 

delay in receiving the FTP transmission), OIT will contact the third party. 

Our review further disclosed that IM performs no review of the official list 

provided by the third party and had very little involvement with the compilation of 

the list. We learned of only infrequent contacts (e.g., once in 2007) between IM 

staff and the third party regarding whether certain securities or types of securities 

should be included in the official list. Also, we were not able to identify any 

contract or agreement with the third party that prescribes how the list is to be 

prepared (see Finding 6 below). Because institutional investment managers are 

permitted by Commission rule to rely on the official list to prepare their 13F 

reports, it is important that the official list be up-to-date and accurate. Therefore, 

the SEC should be performing oversight of the official list, rather than relying 

exclusively upon a third party. 

Recommendation 5: 

The Chairman’s Office should assign to an appropriate division and/or 

office responsibility for reviewing the official list of Section 13(f) securities 

that is prepared by a third party each quarter and testing the list for 

accuracy and completeness on a sample basis. 

Management Comments. The Chairman’s Office concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased the Chairman’s Office concurred with this 

recommendation. 

Finding 6: The SEC Has No Contract with the 

Third Party that Compiles the Official List of 

Section 13(f) Securities 

There is no contract between the third party that prepares 

the official list of Section 13(f) securities and the 

Commission. 

During our review, both IM staff and the third party that provides the official list of 

Section 13(f) securities informed us that they were not aware of any contract or 

agreement between the SEC and the third party regarding the preparation of the 

list. The SEC’s Office of Acquisitions within the Office of Administrative Services 

confirmed that there was no contract between the SEC and the third party and 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

18 

 

that none had ever been awarded. The third party did provide an informal 

memorandum, dated March 13, 1979, which enclosed the specifications for the 

official list of Section13(f) securities. This specifications document discussed the 

background and requirements of Section 13(f), the definition of Section 13(f) 

securities, what types of securities should be included on the official list and how 

the list should be compiled. The document also indicated that a sample layout 

for the computer tape containing the official list was included. We also found that 

no payments are being made to the third party by the Commission in connection 

with the preparation or delivery of the official list of Section 13(f) securities.51

Because there is no formal contract between the third party and the Commission 

regarding the official list of Section 13(f) securities, the third party could stop 

preparing the official list and providing it to the SEC at any time and the SEC 

would have no recourse. 

Moreover, the current arrangement with the third party appears to violate the 

voluntary services prohibition of the Antideficiency Act, 13 U.S.C. § 1342, which 

provides, in part, that “[a]n officer or employee of the United States Government 

or the District of Columbia government may not accept voluntary services for 

either government or employ personal services exceeding that authorized by law 

except for emergencies involving the safety of human life or the protection of 

property.” 

Comptroller General opinions have defined a “no-cost contract” as “a formal 

arrangement between a government entity and a vendor under which the 

government makes no monetary payment for the vendor’s performance.”52 

According to the Comptroller General, “[a]t issue when a federal agency agrees 

to a no-cost contract and receives services without having to pay is whether the 

agency has violated the Antideficiency Act’s voluntary services prohibition, 13 

U.S.C. § 1342.”53 Specifically, a no-cost contract raises the question of whether 

it is void due to a lack of consideration.54 In addressing this issue, the 

Comptroller General has held that an agency may enter into a valid, binding nocost contract without violating the Antideficiency Act’s voluntary services 

prohibition, because services performed pursuant to a formal contract, in which 

the agency has no financial obligation and the contractor has no expectation of 

payment from the government, are not “voluntary” within the meaning of the 

prohibition.55

51 The third party located two purchase orders for 1981 and 1982, which reflected an annual fee of $1,200 

for providing a quarterly tape covering Form 13F filings. Nonetheless, the third party confirmed that, to its 

knowledge, the third party is not receiving payment from the SEC or any other party for the delivery of the 

Section 13(f) securities file to the SEC. 52 No-Cost Contracts for Event Planning Services, B-308968, 2007 U.S. Comp. Gen. LEXIS 220 (Nov. 27, 

2007), at *4. 

53 Id. at *4-*5. 54 Id. at *5, n.2. 55 Id. at *14. See also General Services Administration and Real Estate Brokers’ Commission, B-302811, 

2004 U.S. Comp. Gen. LEXIS 164 (July 12, 2004)(“The acceptance of services without payment pursuant to 
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The current arrangement with the third party would appear to violate 13 U.S.C. § 

1342 because there is no formal binding contract between the parties. If it 

wishes to continue the current arrangement, the SEC should enter into a formal 

contract or agreement with the third party that specifies that the SEC has no 

financial obligation and the firm has no expectation of payment from the 

government. 

Recommendation 6: 

The Division of Investment Management, in consultation with the Office of 

Administrative Services and the Chairman’s Office, should ensure that the 

Securities and Exchange Commission (SEC) enters into a formal contract 

or agreement with the third party that prepares the official list required by 

Section 13(f)(3) of the Securities Exchange Act of 1934. This contract or 

agreement should document the third party’s responsibilities for providing 

the official list on a quarterly basis and explicitly state that the SEC has no 

financial obligation and the firm has no expectation of payment from the 

government. 

Management Comments. IM and OAS concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased IM and OAS concurred with this 

recommendation. 

Finding 7: A Majority of the Confidential 

Treatment Requests that Were Selected for 

Testing Lacked Files with Supporting 

Documents and Forms 

Of the 25 CTRs selected in our initial sample, IM or the 

SEC’s Records Management Branch (RM) could not provide 

files or any supporting documents for 12 of the sample 

items. When we selected an additional 12 CTRs to replace 

the initial sample items, IM or RM could not locate files for 

eight of the 12 additional sample items. 

In order to determine whether IM properly processed CTRs, we selected a 

sample of 25 CTRs to perform testing for compliance with the applicable 

statutory, regulatory and procedural requirements. For each item selected, we 

requested a file from IM, and in some cases RM, containing the CTR letter 

a valid, binding no-cost contract does not augment an agency’s appropriation nor does it violate the 

voluntary services prohibition.”). 
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submitted by the institutional investment manager, the applicable Form 13F, 

supporting documents and, for completed requests, IM’s letter responding to the 

CTR. 

In response to our request for these 25 files, IM or RM could not locate any files 

or provide any supporting documentation for 12 of these sample items (48 

percent). For another two sample items (eight percent), no file could be located, 

but IM did provide supporting documents. 

Because we were unable to perform testing on 12 of the items selected in our 

initial sample of 25 CTRs due to the lack of availability of files or any supporting 

documentation, we selected an additional 12 CTRs in order to perform 

compliance testing. 

Of the 12 additional sample items, IM provided files for only four items (33.3 

percent), and indicated that the files for the remaining eight items (66.7 percent) 

should be under the custody of RM. The confidential treatment process had 

been completed with respect to these eight items and IM stated that, consistent 

with its existing procedures, it had sent the files to RM at various times. When 

contacted, however, RM could not find the files for any of the eight sample items 

and indicated that they had no record of ever receiving the files.56 The large 

number of missing files limited the amount of testing we were able to perform. 

In addition, the large amount of missing files raises concerns that confidential 

information that may exist in a completed Section 13(f) CTR could be misplaced, 

lost, or inadvertently disclosed. As institutional investment managers are 

required to submit to IM the Form 13F containing their holdings in Section 13(f) 

securities at the time they submit their CTRs, safeguarding these materials after 

a Section 13(f) CTR is completed is important. As part of our testing, we 

reviewed supporting documents, such as IM’s response letter to the CTR (if such 

a letter had been issued) or the status of the request according to IM’s database 

listing, to determine how many of the CTRs for which the filings were missing 

resulted in a grant of confidential treatment. We were able to verify that, as of 

June 2010, confidential treatment had been granted for six of the original 14 

sample items with missing files (43 percent) and for three of the additional 12 

sample items with missing files (25 percent). As a consequence, there was no 

control over nine files that should have contained information for which IM 

determined confidential treatment was warranted. 

Further, based upon the missing files noted during our review, it does not appear 

that the SEC is complying with its records retention schedule for confidential 

56 RM officials indicated that, under the Commission’s records retention schedule, the CTR files should have 

been in IM’s possession if they were less than two years old. RM officials also acknowledged receipt of a 

box from IM, which they claim did not include an index of the materials contained in the box. RM officials 

indicated that the box had essentially been untouched since its arrival from IM until the OIG’s request for the 

files and, therefore, RM did not believe that IM ever sent the files in question to RM. 
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treatment materials, as IM has not been retaining CTR files for the appropriate inhouse retention period and RM indicated that it had no record of receiving the 

missing files.57 Our inquiries of IM and RM staff during our review also revealed 

that they had been unaware that the existing practices and procedures regarding 

the files for Section 13(f) CTRs were not in accordance with the records retention 

schedule. 

Recommendation 7: 

The Division of Investment Management and the Records Management 

Branch should modify their respective policies and procedures to ensure 

that files for the processing of confidential treatment requests under 

Section 13(f) of the Securities Exchange Act of 1934 are properly 

maintained and retained in accordance with the applicable record 

retention schedule, and should ensure that the established policies and 

procedures are followed. 

Management Comments. IM and RM have concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased IM and RM concurred with this 

recommendation. 

Finding 8: Certain Filers Received De Facto

Confidential Treatment Even Though Their 

Applications Did Not Meet the Criteria for 

Confidential Treatment Under Section 13(f) 

Certain requesters received de facto confidential treatment 

although their requests did not meet the substantive criteria 

for confidential treatment of Section 13(f) information. 

Requirements for Obtaining Confidential Treatment Under 

Section 13(f) 

As discussed above, Section 13(f)(3) provides that the Commission, as it 

determines to be necessary or appropriate in the public interest or for the 

protection of investors, may delay or prevent the public disclosure of information 

filed in Section 13(f) reports in accordance with the FOIA. According to IM, FOIA 

57 See National Archives and Records Administration Standard Form 115, Job Number N1-266-98-1, 

Approved by the Archivist of the United States on Feb. 22, 1999 (requiring transfer of confidential treatment 

materials to the Federal Records Center after two years and destruction after 20 years.) Based upon the 

responses to our draft report, we determined that there is considerable disagreement and confusion 

between RM and IM regarding the appropriate retention schedule for CTR files. This confusion must be 

remedied in order for appropriate action to be taken consistent with Recommendation 7 of this Report. 
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Exemption 4 is the FOIA exemption that generally applies to Section 13(f) CTRs. 

IM’s FAQs About Form 13F state that “[a]t a minimum, requests for confidential 

treatment must satisfy the requirements of FOIA Exemption 4 which protects 

‘trade secrets and commercial or financial information obtained from a person 

and privileged or confidential.’”58 The standards for Section 13(f) confidential 

treatment are set forth in Rule 24b-2 under the Exchange Act and the 

Instructions to Form 13F. Rule 24b-2(c) states that “[p]ending a determination as 

to the objection [to public disclosure] filed[,] the material for which confidential 

treatment has been applied will not be made available to the public.” 

According to IM’s guidance to confidential treatment filers, the legislative history 

of Section 13(f) emphasizes the importance of granting confidential treatment to 

an ongoing investment strategy of an investment manager because “[d]isclosure 

of such strategy would impede competition and could cause increased volatility in 

the market place.”59 IM’s guidance further provides that IM’s position is that 

Section 13(f) CTRs “can be granted only under certain limited circumstances.”60 

The Form 13F confidential treatment request instructions state that “a [m]anager 

requesting confidential treatment must provide enough factual support for its 

request to enable the Commission to make an informed judgment as to the 

merits of the request.”61 The instructions further provide that the request should 

address all pertinent factors, including several listed relevant factors.62 These 

factors include, among other things, the investment strategy being followed with 

respect to the relevant securities holdings, an explanation of why public 

disclosure of the securities would likely reveal the investment strategy, a 

demonstration that such revelation of an investment strategy would be 

premature, and a demonstration that failure to grant the CTR would likely cause 

substantial harm to the manager’s competitive position.63 IM’s guidance to 

confidential treatment filers makes clear that a confidential treatment application 

that does not provide enough information to satisfy the required elements will be 

denied.64

Pursuant to Rule 24b-2(b)(2)(ii) under the Exchange Act, the confidential 

treatment applicant must justify the time period for which confidential treatment is 

58 Frequently Asked Questions, Question 52 at pp. 14-15 (quoting 5 U.S.C. § 552(b)(4)). 59 Scheidt Letter at p. 2 (quoting Report of Senate Comm. on Banking, Housing and Urban Affairs, S. Rep. 

No. 75, 94th Cong., 1st Sess. 87 (1975)). 60 Scheidt Letter at p.1. 61 Form 13F, Instructions for Confidential Treatment Requests at p. 2. 62 Id. See also Scheidt Letter at pp. 3-5. 63 Form 13F, Instructions for Confidential Treatment Requests, at p. 2, Item 2. The confidential treatment 

instructions to Form 13F also provide for confidential treatment for open risk arbitrage positions if certain 

good faith representations are made. If the required representations are made in writing at the time the 

Form 13F is filed, the Commission will automatically accord the subject securities holdings confidential 

treatment for a period of up to one year from the date the institutional investment manager is required to file 

the Form 13F with the Commission. Id. at pp. 2-3, Item 2(f). 64 Scheidt Letter at p. 3. 
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tment 

 

sought.65 Confidential treatment based upon a claim that the subject information 

is confidential, commercial or financial information may initially be requested for a 

period not to exceed one year from the date the manager is required to file the 

Form 13F report with the Commission.66 However, the request “should be 

limited to the period of time necessary to effectuate the institutional inves

manager’s investment strategy.”67 In order to extend the time period for which 

confidential treatment has been granted, the institutional investment manager 

must file a new request for confidential treatment at least 14 days in advance of 

the expiration date.68 If the Commission denies a CTR, or upon expiration of the 

confidential treatment previously granted for a filing, absent a hardship 

exemption, the institutional investment manager must submit electronically within 

six business days of the expiration or notification of the denial, as applicable, a 

Form 13F report, or an amendment to a publicly-filed Form 13F report.69 

Certain Filers Have Been Afforded De Facto Confidential 

Treatment 

As mentioned above, IM, acting under delegated authority from the Commission, 

grants or denies applications for confidential treatment of information filed under 

Section 13(f), and can revoke grants of confidential treatment for any such 

applications. According to IM, Rule 24b-2(c) under the Exchange Act provides 

for confidentiality pending review of a Section 13(f) CTR in order to, among other 

things, safeguard the interest of the requester. Thus, any passage of time before 

IM issues a written response to a CTR will result in the requester receiving de 

facto confidential treatment for some or all of its reportable securities positions. 

Our review of records pertaining to approximately 400 Section 13(f) CTRs that 

were submitted between January 2008 and December 2009 revealed that this 

has, in fact, occurred in certain situations. One of those ongoing situations, 

discussed below, resulted in six to 16 managers per quarter receiving 

confidential treatment for a single holding over some part of a two-calendar year 

period. The other ongoing situation, also discussed below, involves a particular 

class of filer. 

During our review, we obtained from IM a database listing of CTRs submitted 

between January 2008 and December 2009. Our review of this listing revealed 

that, for certain filers, there was no information showing whether the request had 

been granted or denied. Upon inquiry of the IM staff who maintain the database, 

we learned that a majority of the filers with missing status were holding securities 

of one particular issuer, and that IM had not officially granted or denied the CTRs 

65 17 C.F.R. § 240.24b-2(b)(2)(ii). 66 Form 13F, Instructions for Confidential Treatment Requests, at p. 2, Item 2(e). 67 Frequently Asked Questions, Question 57a at p. 21. See also Scheidt Letter at p. 3. 68 Form 13F, Instructions for Confidential Treatment Requests at p. 3, Item 2(g). 69 Id. at p. 3, Item 4. 
Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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submitted by these filers. We found that some CTRs pertaining to the securities 

of the issuer that had neither been granted nor denied dated back to March 2008. 

Most of the managers that requested confidential treatment for their position in 

the issuer filed de novo requests when the initial one-year period of confidential 

treatment requested was due to expire. In the absence of a written response to 

their quarterly requests, such managers received de facto confidential treatment. 

In some instances, such period of de facto confidential treatment was longer than 

one year. 

During the review, IM officials provided us with details regarding their 

communications with the issuer, as well as IM’s exploration of potential options to 

address the situation. Our review determined that these requests for confidential 

treatment did not meet the substantive criteria for granting a CTR. Therefore, 

based upon the applicable procedures and IM’s own guidance, we believe these 

requests should have been denied. 

Another instance in which Form 13F filers received de facto confidential 

treatment involved a particular class of filer, certain large foreign institutional 

investment managers. The portfolios of these foreign managers generally 

consist of assets such as stocks, bonds, property or other financial instruments, 

and such managers generally invest on a global basis. Our review of IM’s CTR 

database listing for the period from March 2008 to December 2009 revealed that 

IM had not granted or denied CTRs submitted by a particular large foreign 

institutional investment manager for its March, June and December 2009 filings, 

thus affording these filings some period of de facto confidential treatment. 

IM staff explained to the OIG their work to date in analyzing the large foreign 

institutional investment manager’s CTRs. Our review determined that such 

requests for confidential treatment under Section 13(f)(3) did not meet the 

substantive criteria for the granting of confidential treatment. Rather than 

denying the requests, however, IM did not respond to the requests in writing and, 

as a result, the foreign manager received de facto confidential treatment. 

Recommendation 8: 

The Division of Investment Management (IM), in consultation with the 

Chairman’s Office, as necessary, should take appropriate steps to 

improve its policies and procedures to ensure that written requests for 

confidential treatment under Section 13(f) of the Securities Exchange Act 

of 1934 (particularly certain novel requests) are granted or denied within 

an appropriate timeframe, so that institutional investment managers are 

not afforded de facto confidential treatment as a result of IM not issuing a 

written response. 
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Management Comments. IM concurred with this recommendation. See 

Appendix V for management’s full comments. 

OIG Analysis. We are pleased that IM concurred with this 

recommendation. 

Recommendation 9: 

The Division of Investment Management, in consultation with the Office of 

the General Counsel, the Office of International Affairs and the Chairman’s 

Office, as necessary, should take appropriate steps to improve its policies 

and procedures to ensure that requests for relief under Section 13(f) of the 

Securities Exchange Act of 1934 made by certain large foreign institutional 

investment managers are addressed in a timely and appropriate manner. 

Management Comments. IM concurred with this recommendation. See 

Appendix V for management’s full comments. 

OIG Analysis. We are pleased that IM concurred with this 

recommendation. 

Finding 9: Form 13F Does Not Currently 

Require Disclosure of All Significant 

Investment Activities of Institutional 

Investment Managers and Could Be Improved 

The current Form 13F does not provide for the disclosure of 

all significant investment activities of institutional investment 

managers, and it could be improved to be more useful to the 

public. 

Limitation on Securities Currently Required to be Reported 

Under Section 13(f) 

The types of information and categories of investments required to be reported 

under Section 13(f) have not been updated since the enactment of that Section in 

1975. The types of securities required to be reported under Section 13(f) include 

“exchange-traded (e.g., NYSE, AMEX) or NASDAQ-quoted stocks, equity 

options and warrants, shares of closed-end investment companies, and certain 

convertible debt securities.”70 More sophisticated investment vehicles, such as 

derivatives or shares of open-end investment companies and mutual funds that 

70 Frequently Asked Questions, Question 7 at p. 3. 
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 an 

 

might have been used to hedge equity securities, are not required to be reported 

on Form 13F. As a consequence, the public cannot obtain a complete picture of 

all significant investment activities of institutional investment managers. 

Aggregation of Securities Reported on Form 13F 

Section 13(f) allows institutional investment managers to report securities over 

which the institutional investment managers have discretion in the aggregate, 

making Form 13F filings less helpful for users to analyze institutional investment 

managers’ activities. According to IM’s FAQs About Form 13F, an investment 

advisory firm that has sole investment discretion may aggregate all of its holdings 

in each issuer and report all of its holdings in a security in one entry on Form 

13F.71 An investment advisory firm may also aggregate its holdings on Form 

13F if it shares investment discretion with someone that does not have

independent obligation to file under Section 13(f).72 According to a Risk Fin staff 

member, a requirement that institutional investment managers separately report 

holdings in proprietary accounts and holdings in customer accounts would 

provide the public with a more meaningful picture of the activities of institutional 

investment managers. 

Average Positions in Section 13(f) Securities 

Institutional investment managers are required to report Section 13(f) securities 

held at the end of a quarter. Hence, an institutional investment manager that 

purchased a significant amount of Section 13(f) securities after the beginning of a 

quarter, but disposed of them before the quarter end, would not be required to 

report those holdings. As a consequence, the public does not have complete 

information about the activities of the institutional investment managers during a 

quarter and the effect of those activities on the market. A Risk Fin staff member 

noted that a simple way to fix this problem would be to add a requirement to 

Section 13(f) that would require the institutional investment managers to report 

average positions held in Section 13(f) securities during a quarter. This 

additional information would provide a clearer picture of the institutional 

investment managers’ activities. 

Increasing the Threshold for Section 13(f) Reporting 

According to an IM attorney who reviewed the issue, the current Section 13(f) 

reporting threshold of $100 million is outdated as it does not reflect inflation and 

appreciation in securities since the inception of Section 13(f) in 1975. In 2006, at 

IM’s request, Risk Fin (then the Office of Economic Analysis) performed an 

analysis of the impact of increasing the threshold required for Section 13(f) 

71 Id., Question 38 at p. 10. 72 Id., Question 38 at pp. 10-11. 
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reporting from $100 million to an amount reflecting inflation. According to that 

analysis, a threshold of $300 million, which reflected inflation using the consumer 

price index, would result in a significant decrease in the number of institutional 

investment managers that would be required to file Form 13F, but a relatively 

modest decrease in the total dollar amount of assets covered. We believe that 

this analysis should be updated to determine whether an increase in the 

threshold amount should be pursued. 

Aggregate Purchases and Sales of Section 13(f) Securities 

Section 13(f)(1)(D) gives the Commission the authority to require institutional 

investment managers to report the aggregate purchases and aggregate sales of 

holdings in Section 13(f) securities during the reporting period.73 However, the 

Commission currently has not adopted a rule to require the disclosure of 

aggregate purchases and sales of Section 13(f) securities. This additional 

disclosure would assist the public in better understanding the frequency and 

volume of trading activities of the institutional investment managers. 

Recommendation 10: 

The Division of Investment Management, in consultation with the Division 

of Risk, Strategy, and Financial Innovation, the Office of the General 

Counsel and the Chairman’s Office, should determine whether legislative 

changes to Section 13(f) of the Securities Exchange Act of 1934 should be 

sought, specifically with respect to expanding the definition of Section 

13(f) securities, requiring separate reporting of securities held in 

proprietary accounts and customer accounts, reporting average positions 

in Section 13(f) securities, and increasing the Section 13(f) reporting 

threshold. 

Management Comments. IM and Risk Fin concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased that IM and Risk Fin concurred with this 

recommendation. 

Recommendation 11: 

The Division of Investment Management, in consultation with the 

Chairman’s Office, should request that the Division of Risk, Strategy, and 

Financial Innovation update its analysis of the impact of increasing the 

reporting threshold of $100 million for Section 13(f) of the Securities 

Exchange Act of 1934. 

73 15 U.S.C. § 78m(f)(1)(D). 
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Management Comments. IM and Risk Fin have concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased IM and Risk Fin concurred with this 

recommendation. 

Recommendation 12: 

The Division of Investment Management, in consultation with the Division 

of Risk, Strategy, and Financial Innovation and the Chairman’s Office, 

should determine whether to recommend to the Commission that it adopt 

a rule requiring institutional investment managers to report aggregate 

purchases and aggregate sales of securities required to be reported under 

Section 13(f) of the Securities Exchange Act of 1934. 

Management Comments. IM and Risk Fin concurred with this 

recommendation. See Appendix V for management’s full comments. 

OIG Analysis. We are pleased that IM and Risk Fin concurred with this 

recommendation. 
Appendix I 

Acronyms

AMEX American Stock Exchange 

CTR Confidential Treatment Request 

CUSIP Committee on Uniform Securities Identification 

Procedures 

EDGAR Electronic Database Gathering and Retrieval 

Exchange Act Securities Exchange Act of 1934 

FAQs Frequently Asked Questions 

FOIA Freedome of Information Act 

FTP File Transfer Protocol 

IM Division of Investment Management 

NASDAQ National Association of Securities Dealers Automated 

Quotations 

NYSE New York Stock Exchange 

OCIE Office of Compliance Inspections and Examinations 

OGC Office of the General Counsel 

OIG Office of Inspector General 

OIT Office of Information Technology 

Risk Fin Division of Risk, Strategy, and Financial Innovation 

RM Records Management Branch 

SAS Statement of Auditing Standards 

SEC or Commission U.S. Securities and Exchange Commission 

XBRL Extensible Business Reporting Language 

XML Extensible Markup Language 

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Appendix II 

Scope and Methodology 

This review was not conducted in accordance with the government auditing 

standards. 

Scope. The scope of this review covered the period from January 2008 to 

December 2009, and included a review of Congress’s intent in enacting Section 

13(f) of the Exchange Act, the reporting process for Section 13(f), the Form 13F 

filings and requests for confidential treatment of information reported on Form 

13F. We obtained from IM a listing of CTRs from January 2008 to December 

2009, information concerning IM’s internal procedures for processing CTRs, and 

other information necessary to determine whether the CTRs were being properly 

processed. We conducted our fieldwork from May 2010 to June 2010. 

Methodology. To meet the objectives to examine whether the Commission’s 

implementation of and current practices under Section 13(f) meet Congress’s 

intent in establishing Section 13(f); determine whether the reporting of entities 

covered under Section 13(f) is appropriately designed to comply with the 

statutory requirements; and determine whether the Commission’s policies and 

procedures for reviewing and processing requests for confidential treatment of 

information required to be reported under Section 13(f) are adequate and 

appropriate, the OIG conducted a survey of IM staff members who have duties or 

responsibilities pertaining to Section 13(f). We then interviewed the IM staff 

responsible for executing policies and procedures with respect to Section 13(f), 

primarily including the processing of CTRs. We also interviewed staff in Risk Fin 

and OCIE regarding the Section 13(f) reporting process, and RM staff regarding 

the procedures pertaining to CTR files. Additionally, we reviewed IM’s 

procedures for processing CTRs. We selected and tested a sample of CTRs that 

were processed by IM to determine if IM adhered to the applicable rules and 

regulations in affording confidential treatment to the Section 13(f) filings of 

institutional investment managers. 

Internal or Management Controls. We reviewed internal and management 

controls as they pertained to the objectives of our review. 

Use of Computer-Processed Data. We relied on data from the SEC’s EDGAR 

system, which included the name of the filer and Form 13F data for a selected 

sample of CTRs. The EDGAR system does not process any of the data 

contained in the Form 13F filings, but rather only stores the filings in electronic 

format. As a result, we considered the relevant risks to be: 

• An EDGAR system failure to receive or retain a Form 13F filing from 

an issuer; and 

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Appendix II 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

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31 

• Information security risks related to whether Form 13F information in 

the EDGAR system could be compromised. 

We considered the risk surrounding information security and noted that, in 

November 2007, OIT certified and accredited the EDGAR system, as required by 

the Federal Information Security Management Act of 2002. Therefore, we 

concluded that we could rely upon the information in the EDGAR system as it 

pertains to information security. 

We also relied on IM’s internal database listing for CTRs. We performed testing 

of the database listing for accuracy and completeness by comparing information 

in the database listing to information contained in source documents, such as 

Forms 13F and CTR letters. 

Judgmental Sampling. IM provided us with a list of CTRs submitted under 

Section 13(f) for the period from January 2008 to December 2009, which 

included approximately 446 CTRs. We determined that a sample size of 25 (5.6 

percent) was reasonable for the purposes of our testing. 
Appendix III 

Criteria 

Section 13(f) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(f). 

Established a reporting requirement for securities holdings of institutional 

investment managers in order to increase the public availability of information 

regarding the securities holdings of institutional investors. Requires this data to 

be made publicly available unless the Commission prevents or delays disclosure 

as necessary or appropriate in the public interest to protect investors. Enacted 

by Public Law 94-29, the Securities Acts Amendments of 1975, on June 4, 1975. 

Voluntary Services Prohibition of the Antideficiency Act, 31 U.S.C. § 1342. 

Prohibits a U.S. Government officer or employee from accepting voluntary 

services except for emergencies involving the safety of human life or the 

protection of property. 

Report of the Senate Committee on Banking, Housing and Urban Affairs, 

Senate Report No. 94-75, 94th Cong., 1st Sess. (Apr. 14, 1975), reprinted in 

1975 U.S.C.C.A.N. 179. Contains the legislative history for Section 13(f) of the 

Exchange Act. 

Commission Rule13f-1, 17 C.F.R. § 240.13f-1, Reporting by Institutional 

Investment Managers of Information with Respect to Accounts Over Which 

They Exercise Investment Discretion. Requires quarterly reporting of 

institutional investment managers that exercise investment discretion of 

securities holdings of $100 million or more on Form 13F. Initially adopted on 

June 15, 1978, and revised on January 5, 1979, and January 12, 1999. 

Commission Rule 24b-2, 17 C.F.R. § 240.24b-2, Nondisclosure of 

Information Filed with the Commission and with Any Exchange. Specifies 

the procedure for requesting confidential treatment of information required to be 

filed with the Commission under the Exchange Act. Provides that the procedure 

set forth in the rule is the exclusive procedure for requesting confidential 

treatment of information required to be filed under the Exchange Act. Initially 

adopted on April 28, 1976, and revised on February 23, 1993, June 9, 1995, 

September 7, 1995, and May 31, 1996. 

Commission Rule of Organization 30-5(c)(1) and (2), 17 C.F.R. § 200.30-

5(c)(1) and (2), Delegation of Authority to Director of Division of Investment 

Management. Delegates authority to the Director of IM to grant and deny 

applications for confidential treatment of information filed pursuant to Section 

13(f) and Rule 13f-1 thereunder, and to revoke a grant of confidential treatment 

for any such application. Added on February 5, 1981. 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

32 
Appendix III 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

33 

Instructions for Form 13F, Information Required of Institutional Investment 

Managers Pursuant to Section 13(f) of the Securities Exchange Act of 1934 

and Rules Thereunder. Contains both general instructions for filing Form 13F 

and instructions for CTRs submitted under Form 13F. Initially adopted on June 

15, 1978, and revised on January 5, 1979, June 28, 1979, and May 14, 1985, 

and January 12, 1999. 

Division of Investment Management Frequently Asked Questions About 

Form 13F, May 2005. Contains the staff’s views on frequently asked questions 

to assist institutional investment managers that are required to file Form 13F. 

Letter from Douglas Scheidt, Associate Director and Chief Counsel, 

Division of Investment Manager to Section 13(f) Confidential Treatment 

Filers. Discusses IM’s position regarding Form 13F confidential treatment 

requests. Issued on June 17, 1998. 
Appendix IV 

List of Recommendations 

Recommendation 1: 

The Chairman’s Office should delegate primary responsibility for reviewing and 

analyzing Form 13F information to the appropriate division or office. 

Recommendation 2: 

The Chairman’s Office should assign to the appropriate divisions or offices 

responsibility for monitoring Section 13(f) filings for accuracy and completeness 

in order to limit the errors in or problems with the filings and thereby enhance the 

usefulness and reliability of the data. 

Recommendation 3: 

The Division of Investment Management and the Office of Information 

Technology should renew the efforts that were begun in 2005 and implement 

checks in the Electronic Data Gathering and Retrieval (EDGAR) system that will 

detect and/or correct obvious errors contained in the Forms 13F that are 

uploaded in EDGAR. 

Recommendation 4: 

The Division of Investment Management, in consultation with the Chairman’s 

Office, should work with the Office of Information Technology and update Form 

13F to a more structured format, such as Extensible Markup Language (XML), to 

make it easier for users and researchers to extract and analyze Section 13(f) 

data. 

Recommendation 5: 

The Chairman’s Office should assign to an appropriate division and/or office 

responsibility for reviewing the official list of Section 13(f) securities that is 

prepared by a third party each quarter and testing the list for accuracy and 

completeness on a sample basis. 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 34 
Appendix IV 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 35 

Recommendation 6: 

The Division of Investment Management, in consultation with the Office of 

Administrative Services and the Chairman’s Office, should ensure that the 

Securities and Exchange Commission (SEC) enters into a formal contract or 

agreement with the third party that prepares the official list required by Section 

13(f)(3) of the Securities Exchange Act of 1934. This contract or agreement 

should document the third party’s responsibilities for providing the official list on a 

quarterly basis and explicitly state that the SEC has no financial obligation and 

the firm has no expectation of payment from the government. 

Recommendation 7: 

The Division of Investment Management and the Records Management Branch 

should modify their respective policies and procedures to ensure that files for the 

processing of confidential treatment requests under Section 13(f) of the 

Securities Exchange Act of 1934 are properly maintained and retained in 

accordance with the applicable record retention schedule, and should ensure that 

the established policies and procedures are followed. 

Recommendation 8: 

The Division of Investment Management (IM), in consultation with the Chairman’s 

Office, as necessary, should take appropriate steps to improve its policies and 

procedures to ensure that written requests for confidential treatment under 

Section 13(f) of the Securities Exchange Act of 1934 (particularly certain novel 

requests) are granted or denied within an appropriate timeframe, so that 

institutional investment managers are not afforded de facto confidential treatment 

as a result of IM not issuing a written response. 

Recommendation 9: 

The Division of Investment Management, in consultation with the Office of the 

General Counsel, the Office of International Affairs and the Chairman’s Office, as 

necessary, should take appropriate steps to improve its policies and procedures 

to ensure that requests for relief under Section 13(f) of the Securities Exchange 

Act of 1934 made by certain large foreign institutional investment managers are 

addressed in a timely and appropriate manner. 
Appendix IV 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 36 

Recommendation 10: 

The Division of Investment Management, in consultation with the Division of Risk, 

Strategy, and Financial Innovation, the Office of the General Counsel and the 

Chairman’s Office, should determine whether legislative changes to Section 13(f) 

of the Securities Exchange Act of 1934 should be sought, specifically with 

respect to expanding the definition of Section 13(f) securities, requiring separate 

reporting of securities held in proprietary accounts and customer accounts, 

reporting average positions in Section 13(f) securities, and increasing the Section 

13(f) reporting threshold. 

Recommendation 11: 

The Division of Investment Management, in consultation with the Chairman’s 

Office, should request that the Division of Risk, Strategy, and Financial 

Innovation update its analysis of the impact of increasing the reporting threshold 

of $100 million for Section 13(f) of the Securities Exchange Act of 1934. 

Recommendation 12: 

The Division of Investment Management, in consultation with the Division of Risk, 

Strategy, and Financial Innovation and the Chairman’s Office, should determine 

whether to recommend to the Commission that it adopt a rule requiring 

institutional investment managers to report aggregate purchases and aggregate 

sales of securities required to be reported under Section 13(f) of the Securities 

Exchange Act of 1934. 
Appendix V 

Management Comments 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 37 

MEMORANDUM

TO: H. David Kotz

Inspector General

FROM: Kayla J. Gillanv1)I' . J. bI

Deputy Chiefof ofthe Chairman

DATE: September 24, 2010

SUBJECT: Response to Report No. 480, Review ofthe SEC's Section 13(j) Reporting

Requirements

This memorandum is in response to the Office ofInspector General's Draft Report No.

480, entitled Review ofthe SEC's Section 13(j) Reporting Requirements. We appreciate the

work ofthe Office ofInspector General (OIG) in reviewing the Commission's program and

processes with regard to Section B(f) ofthe Securities Exchange Act of 1934.

Section B(f), which provides for the public availability ofinfonnation regarding the

securities holdings of certain institutional investors, is a vital part ofthe SEC's full

disclosure program. The data that is provided by institutional investors on Fonn BF is

extraordinari1y valuable to investors and other financial market participants. We welcome

the OIG's focus on this important topic, and appreciate the Report's recommendations for

ensuring the effectiveness ofthe agency's program to implement Section 13(f).

The purpose ofthis memorandum is to comment on the three recommendations that the

Report directs to the Office ofthe Chainnan.

Recommendlltion 1: The Chairman 's Office should delegate primary responsibilityfor

reviewing and analyzing Form 13F information to the appropriate division or office.

We concur with this recommendation. While the Report acknowledges the variety of

important ways in which SEC staffmake use ofFonn BF data, including to support the

agency's enforcement and rulemaking activities, we agree that it would be beneficial to

clarify the appropriate roles and responsibilities with regard to data provided under Section

B(f), including identification of a primary office responsible for reviewing and analyzing

Fonn 13F infonnation.

To implement therecommendation, we will work with the relevant SEC offices, including

the Division ofInvestment Management, Division ofCorporation Finance, Division of
Appendix V 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 38 

Response to Report No. 480September 24, 2010

Page 2

Risk, Strategy, and Financial Innovation, and Office ofCompliance Inspections and

Examinations, to assist in identifying and delineating the appropriate scope of

responsibilities with respect to Section B(f), and will consult with the Office ofGeneral

Counsel as to whether formal Commission action would be required to execute any new or

amended responsibilities.

Recommendlltion 2: The Chairman's Office should assign to the appropriate divisions or

offices responsibilityfor monitoring Section 13(f)filingsfor accuracy and completeness in

order to limit the errors in or problems with the filings, thereby enhancing the usefulness

and reliability ofthe data.

We concur with this recommendation. In taking the actions described in the response to

Recommendation I, we will include a specific focus on the responsibility for monitoring of

Section 13(f) filings. Since there are approximately 3,000 to 4,000 Form 13Fs filed each

quarter, we appreciate the OIG's acknowledgement that any actions that might be

considered in connection with enhanced monitoring ofForm 13F filings need not entail

"cumbersome and time-consuming" reviews of each filing. We will also give particular

attention to the specific suggestions made by the OIG to provide for more systematic

monitoring ofForm 13F,such as consideration of a pilot program or other initiative on a

test basis.

Recommendation 5: The Chairman's Office should assign to an appropriate division

and/or office responsibilityfor revieWing the official list ofSection 13(f) securities that is

prepared quarterly by a thirdparty and test it on a sample basis.

We concur with this recommendation. In taking the actions described in the response to

Recommendation 1, we will include a specific focus on office responsibilities with respect

to the "Official List of Section 13(f) Securities" that is posted on the SEC's website. We

agree that it is important that the official list be up-to-date and accurate, since institutional

investment managers rely on it in preparing their BF reports. In addition, as the SEC

moves forward to implement Recommendation 6, which recommends that the SEC enter

into a formal contract or agreement with the third party that prepares the list, it will provide

an appropriate opportunity for the SEC, acting through our Office ofAcquisitions, to obtain

assurances with respect to the quality and reliability ofthe data provided.

Thank you, again, for your focus on these important topics, and for the OIG's work on this

audit. Please don't hesitate to contact me ifyou have any questions.

2
Appendix V 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 39 

To: H. David Kotz

From: Andrew Donohue; Douglas Scheidt; David Grim; Stephan Packs

Dale: Septeni)er24,2010

Re: Divirion ofInvc:stment Management Response to the Office ofInspector Gc:nc:ral's Report

No. 480 - Review ofSEC's section 13(f) Reportq Requir'emcnts

This memorandum is in response to the Office ofInspector Gc:nc:ra1's Report No. 480. 11IanIc you

ilr the oppo~ to respond to the report. We concur with the reconwnendations ofthe report

inlIofar as they pertain 10 the Division ofInvestmo1I Management ('1Mj, and add the ilIJowVlg

cormnmts. .

We are p1eased that the OIG ilund that., '1M has put in place weD construcled revll:w proc;:edures

ilr processing erRs...

In addition, we concur with the Risk Fin conwnenls on the report. In particular, we agree tbat

coDSidc:ralion ofsignificanl changes to Fonn 13F sroukl be part ofl ooordirwed revll:w oftile

overaII SEC ~cm ilr disdomg ownenbip and trInSIClions in the sccwitjes ofpublic

companies, ralhcr than in isolation, and tbat it mly not be possible 10 undc:nlke I revll:w ofthe

DCCCSW)' scope immcdi.al:e!y. 1M will play an important role in this ooordirwed revll:w.

Ahbough as the OIG report recognize$IM's delegatedlUlhorily with respccI to section 13(f) is

limited to coDSidc:ralion ofconfidential. trt:atme:nI. requests under the section, 1M has experience

tbat is rdevanllo each oftile reconnneodations in the report. We look furwllrd to col1aborating

with our colleagues on the staffwho possess relev11l1 expertise in implementing the

recommendations.

Our comments on the specific recorrmendations are desaibod beklw.

Recommendldon 1: The Chainnan's Office should deleglte primary responsibility fur reviewing

and analyzing Fonn 13F inbrmation 10 the IIppropriate division or office.

1M Comments: Becluse lhis is a recommendation br the Chairman's Office, we defer to its

judgment. We concur with the Risk Fin connnents IS they relate to this recommendation,

particularly the discussion ofhow Ihe Commission staffCUITer1tly does use Section 13(f)

information in a number ofimportant ways.

Recommend.don 2: The Chairman's Office should assign to the appropriate divisions or offices

responsibility for monitoring Section l3(f) filings for lecuracy and coropleteness in order to limit

the errors in or problems with the filings and thereby enhance lhe usefulness and reliability ofthe

d~L

1M Comments: Because Ihis is II recommendation for Ihe Chairman's Office, we defer to ils

judgment.
Appendix V 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 40 

- 2 -

Recommcnd.tioa 3: The DIvision ofInvestment Management and the Office ofInfOrmation

Tcchnology should renew the efbrts thai were begun in 2005 and imp\ement chec:b in the

Electronic Data Gathc:riog aDd Retrieval (EOOAR) S)'Stem that will detect and/or conttt obvious

emu'S contained in the Forms 13F that are uploaded in EDGAR.

1M CoIrurfeIllS: We concur with this recommendation.

RKOmJIIU<btiOD 4: The Division ofInvestment Management, in consulWion with the

Chairman's Office, should work with the Office aflniurn.lion TecMology and update Form 13F

to. IMre stIUC:tUred imnal, such as E.nc:nsilk Martup Language (XML), to make il: easier br

usen and resean:bers to extract and analyze Section 13{f) data.

1M Com~lIl$: We concur with this rcc:ommcndation. 1M will share its rclc:vanI experic:nce in

collaborating with the Chairman's Office and the Office oflnfOmwion Tcchnology to implement

this rcoonwnmdation. Per Risk Fin'S oonmx:nlS, we also will benefit from their expertise on these

"""'-

Recommendation 5: The Chairman's Office should assign to an appropriate division and/or

office responsibility fOr reviewing the official list ofSection 13(f) securities that is prepared by a

third pany each quarter and testing the list for aocuracy and completeness on a sample basis.

1M ComIMI'IU; Because this is a reoommcndatxm lOr the OJairman's Office, we defo- to its

judgmcnl.

Recommendation 6: The Division oflnvestrnent Management, in consultation with the Office of

Administrative Services and the Chaimwl.'s Office, should ensure that the Securities and

Exchange Commission (SEC) enters into a furmal contract or agreement with the third party thai

prepares the official list required by Section 13(f)(3) ofthe Securities Exchange Act of 1934. This

oontract or agrecmc:nt should document the third party's responsibilities for providing the official

list on a quarterly basis and explicitly state that the SEC has no financial obligation and the finn

has no expectation ofpayment from the government.

1M Q}mments: We ooncur with this recommendation. 1M will share its relevant experience in

collaborating with the Office ofAdministrative Services and the Chairman's Office to implement

this recommendation.

Recommendation 7: The Division ofInvestment Management and the Records Management

Branch should modify their respe<:tive policies and procedures to ensure that files for the

processing ofconfidential treatment requests wxier Section 13(1) ofthe Securities Exchange Act

of 1934 are properly maintained and retained in acoordance with the applieable record retention

schedu1e, and should ensure that the established policies and procedures are followed.
Appendix V 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 41 

- 3 -

1M Comments: We concur with this recommendation. 1M has already begun coordinating with

Records Management on modifYing the relevant policies and procedures.

Recommendation 8: The Division ofInvestment Management (1M), in consultation with the

Chairman's Office, as necessary, should take appropriate steps to improve its policies and

procedures to ensure that written requests for confidential treatment under Section 13(f) ofthe

Securities Exchange Act of 1934 (particularly certain novel requests) are granted or denied within

an appropriate timeframe, so that institutional investment managers are not afforded de facto

confidential treatment as a result ofIM not issuing a written response.

1M Comments: We concur with this recommendation. As the OIG recognizes, 1M has well

constructed review procedures for processing CTRs. In the cases at issue in recommendation 8,

1M has expended substantial resources in analyzing nove~ complicated issues that go beyond the

issues that typically are the subject of a Form 13F CTR. 1M has and will continue to act

prudently and appropriately in attempting to resolve these matters, focusing on ensuring that no

filer is afforded unwarranted de facto confidential treatment.

Recommendation 9: The Division ofInvestment Management, in consultation with the Office of

the General Counse~ the Office ofIntemational Affairs and the Chairman's Office, as necessary,

should take appropriate steps to improve its policies and procedures to ensure that requests for

reliefunder Section 13(f) ofthe Securities Exchange Act ofl934 made by certain large foreign

institutional investment managers are addressed in a timely and appropriate manner.

1M Comments: We concur with this recommendation. As the OIG recognizes, 1M has well

constructed review procedures for processing CTRs. In the cases at issue in recommendation 9,

1M has expended substantial resources in analyzing novel, complicated issues that go beyond the

issues that typically are the subject of a Form 13F CTR. 1M has and will continue to act

prudently and appropriately in attempting to resolve these matters, focusing on ensuring that no

filer is afforded unwarranted de facto confidential treatment.

Recommendation 10: The Division ofInvestment Management, in consultation with the Division

ofRisk, Strategy, and Financial Innovation, the Office ofthe General Counsel and the Chairman's

Office, should determine whether legislative changes to Section 13(f) ofthe Securities Exchange

Act ofl934 should be sought, specifically with respect to expanding the definition ofSection

13(f) securities, requiring separate reporting ofsecurities held in proprietary accounts and

customer accounts, reporting average positions in Section 13(f) securities, and increasing the

Section 13(f) reporting threshold.

1M Comments: We concur with this recommendation. 1M will share its relevant experience in

collaborating with Risk Fin, OGC, and the Chairman's Office to implement this recommendation.

We also concur with the Risk Fin comments as they relate to this recommendation. In particular,

we emphasize that consideration ofsignificant changes to Form 13F should be part ofa
Appendix V 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 42 

-4-

coordinated review ofthe overall SEC system for disclosing ownership and transactions in the

securities ofpublic companies, rather than in isolation, and that it may not be possible to

undertake a review ofthe necessary scope immediately.

Recommendation 11: The Division ofInvestment Management, in consultation with the

Chairman's Office, should request that the Division ofRisk, Strategy, and Financial Innovation

update its analysis ofthe impact ofincreasing the reporting threshold of$IOO million for Section

13(f) ofthe Securities Exchange Act of 1934.

1M Comments: We concur with this recommendation. 1M will share its relevant experience in

collaborating with the Chairman's Office and Risk Fin to implement this recommendation. We

also concur with the Risk Fin comments as they relate to this recommendation. In particular, we

. emphasize that consideration ofsignificant changes to Form 13F should be part of a coordinated

review ofthe overall SEC system for disclosing ownership and transactions in the securities of

public companies, rather than in isolation, and that it may not be possible to undertake a review of

the necessary scope immediately.

Recommendation 12: The Division ofInvestment Management, in consultation with the Division

ofRisk, Strategy, and Financial Innovation and the Chairman's Office, should determine whether

to recommend to the Commission that it adopt a rule requiring institutional investment managers

to report aggregate purchases and aggregate sales ofsecurities required to be reported under

Section 13(f) ofthe Securities Exchange Act of 1934.

1M Comments: We concur with this recommendation. 1M will share its relevant experience in

collaborating with Risk Fin and the Chairman's Office to implement this recommendation. We

also co~cur with the. Risk .Fin comments as they relate to this recommendation. In particular, we

em~has1Ze that consIderation ofsignificant changes to Form 13F should be part of a coordinated

reVI~w ofthe ~verall SEC system for disclosing ownership and transactions in the securities of

public comparues, rather than in isolation, and that it may not be possible to undertake a review of

the necessary scope immediately.
Appendix V 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 43 

MEMORANDUM

TO: H. David Kotz, Inspector General

FROM: Henry Hu, Director, Division ofRisk, Strategy, and Financial Innovation

~.~.

DATE: September 17,2010

RE: Draft Review ofthe SEC's Section 13(j) Reporting Requirements (Report No 480)

Thank you for the opportunity to review the September 2 "formal draft" ofthe Review of

the SEC's Section 13(j) Reporting Requirements. We appreciate, in particular, your taking into

account many ofthe comments we provided previously to your staff. We concur in the

recommendations ofthe report insofar as they pertain to the Division ofRisk, Strategy, and

Financial Innovation (Risk Fin), and add the following comments.

Risk Fin has assumed the structured data responsibilities ofthe former Office of

Interactive Data arid so will assist the Division ofInvestment Management (1M) in working with

the Office ofInformation Technology as contemplated by Recommendation 4. 1

Staffofour Division, notably our economists, make extensive use of Section 13(f) data.

The examples you have included in the Report reflect that these data are used extensively in our

support of both the SEC's enforcement and rulemaking activities. As to Recommendations 10,

11, and 12, we believe that consideration ofsignificant changes to Form 13F should be part of a

coordinated review ofthe overall SEC system for disclosing ownership and transactions in the

securities ofpublic companies, rather than in isolation. You will understand that it may not be

possible to undertake a review ofthe necessary scope immediately.

Once again, I want to thank you and your stafffor your careful work on this report.

Please don't hesitate to contact me ifI can provide further clarification.

I In this regard, we point out 1hat the last paragraph on page 14 could be misread to imply that the XBRL initiative

somehow conflicted with the goal ofSlnIcturing 13F data. In fact, the XBRL work already completed in connection

with mutual fund holdings reporting substantially overlaps with the 13F stroctured data initiative contemplated by

Recommendation 4, and means that most ofthis work is actually already done.
Appendix V 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 44 

MEMORANDUM

September 16, 2010

TO: H. David Kotz

Inspector General

FROM: Sharon Sheehan _h--- -;11..,..,1..

Associate Executiv~~ Office ofAdministrative Services

SUBJECT: OAS Management Response to Draft Report No. 480, Reviewofthe

SEC's Section 13(f) Reporting Requirements

This memorandum is in response to the Office ofInspector General's Draft Report No.

480, Reviewofthe SEC's Section 13(f) Reporting Requirements. Thank you fur the

opportunity to review and respond to this report. We concur with the recommendation

addressed to OAS.

Reeommendation 6:

OAS concurs. We view our role in implementing the recommendation as support to 1M.

Once a requirements document and proper RQ are submitted to OAS Office of

Acquisitions, we will work with 1M to execute a formal contract or agreement fur the

required services.
Appendix VI 

OIG Response to Management’s Comments 

Review of the SEC’s Section 13(f) Reporting Requirements September 27, 2010 

Report No. 480 

 45 

The Office of Inspector General is pleased that the Chairman’s Office, the 

Division of Investment Management, the Division of Risk, Strategy, and Financial 

Innovation, the Office of Administrative Services, the Office of Information 

Technology, the Office of FOIA and Records Management Services, and the 

Office of International Affairs concurred with all of the report’s 12 

recommendations. We believe that the implementation of these 

recommendations will result in significant improvements to the Section 13(f) 

reporting program and will ensure that, consistent with the intent of Congress in 

enacting Section 13(f), the investing public is provided with reliable and accurate 

information regarding the investment activities of institutional investment 

managers and the Form 13F data is fully utilized for a variety of regulatory 

purposes. We are pleased that the relevant SEC Offices and Divisions have 

agreed to work together to implement our recommendations and to ensure the 

effectiveness of the Section 13(f) program. 
Audit Requests and Ideas 

The Office of Inspector General welcomes your input. If you would like to 

request an audit in the future or have an audit idea, please contact us at: 

U.S. Securities and Exchange Commission 

Office of Inspector General 

Attn: Assistant Inspector General, Audits (Audit Requests/Ideas) 

100 F Street, N.E. 

Washington D.C. 20549 

Tel. #: 202-551-6061 

Fax #: 202-772-9265 

Email: oig@sec.gov 

Hotline 

To report fraud, waste, abuse, and mismanagement at SEC, 

contact the Office of Inspector General at: 

Phone: 877.442.0854 

Web-Based Hotline Complaint Form: 

www.reportlineweb.com/sec_oig