Financial Literacy

A New Rule That Will Hurt Investors

The U.S. Securities and Exchange Commission (SEC) has proposed a new 13F rule. Although the SEC encourages transparencies, this new filing rule would do the complete opposite. Chief Income Strategist Marc Lichtenfeld gives his opinion and explains how it will hurt investors.

When was the last time anything good came out of Washington?

Anytime I see a news story with a Washington dateline, I think, “Here we go, this is going to ruin my day.”

Amid the chaos we are experiencing these days, the Securities and Exchange Commission (SEC) has quietly proposed a rule that will be harmful to investors. No one seems to be taking notice.

I noticed…

The new rule involves 13F data.

What the Proposed 13F Rule Means for Investors

Currently, any institutional money manager with more than $100 million in assets under management must file a 13F document detailing their holdings.

These 13F filings are how we know what stocks investors like Warren Buffett, Carl Icahn, Bill Ackman and many others bought, sold or held in any quarter.

It’s useful information for individual investors.

The new 13F rule proposes that the $100 million threshold be raised to $3.5 billion.

Buffett, Icahn and Ackman would still be required to file, as they are giants in the industry. But 90% of other institutions would not.

In the first quarter of 2020, 5,293 institutions filed 13Fs. Under the new proposal, that number would have dropped to 549.

It’s not just a matter of seeing which individual star money managers bought and sold stock. Knowing if institutions are collectively buying or selling certain stocks is important information – and it’s useful for companies to know who their shareholders are as well.

The strange thing is that the SEC claims it wants to increase transparency in the market, yet this rule will do exactly the opposite…

It will hide the transactions and holdings of all but the very largest institutions, keeping average investors in the dark about what the “smart money” is buying and selling.

Daniel Collins of WhaleWisdom says…

Many managers are known to talk among themselves, sharing ideas and information. They have access to company management that small investors don’t.

Given the SEC’s emphasis on a level fair playing field, this rule change makes no sense.

I completely agree.

One SEC commissioner has come out against the proposed 13F rule. Allison Herren Lee stated, “This proposal joins a long list of recent actions that decrease transparency and reduce both the Commission’s and the public’s access to information about our markets.”

Even Goldman Sachs thinks it’s a bad proposal. “More information is better than less,” it said.

I use 13F information all the time when analyzing stocks. I research who is buying and selling what I’m interested in. There are several money managers who I track. If they are starting a new position in a stock, it is often worth taking a good look at.

This proposal is not a rule yet. The SEC is still accepting comments from the public. If you’d like to voice your opinion, you can do so here. Click on “Reporting Threshold for Institutional Investment Managers, File No: S7-08-20.”

I completely agree with Goldman Sachs: More information is better.

I can’t believe we have to point that out to the SEC… although nothing Washington does surprises me anymore.

Good investing,


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A master of the steady, reliable science of income investing, Marc’s commentary has appeared in The Wall Street Journal, Barron’s and U.S. News & World Report. He has also appeared on CNBC, Fox Business and Yahoo Finance. His book Get Rich With Dividends: A Proven System for Double-Digit Returns achieved best-seller status shortly after its release in 2012. He captures the hearts and minds of readers approaching their golden years in his daily e-letter, Wealthy Retirement.


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