Modernization of the 13F Reporting Rules

NIRI recognizes the need for greater transparency within the investment community, and supports a reporting regime that promotes more timely and frequent long position reporting, as well as commensurate full and fair short position disclosure.

Section 929X of the Dodd-Frank Act requires the Securities and Exchange Commission (SEC) to promulgate rules obligating investment managers to publicly report short sale activity at a minimum of once every month. NIRI also believes that the benefits to investors and public companies of long-position reporting justify a similarly substantial increase of the frequency of Form 13F reporting.

NIRI has joined with the NYSE Group in filing rulemaking petitions that seek public disclosure of short positions and modernization of the rules for long-position reporting. Nasdaq also has filed a rulemaking petition to require Form 13F filers to report their short positions.

NIRI encourages members and their companies to urge the SEC to adopt a rule to provide improved transparency around short selling. More information, including comment letter templates, can be found on the Short Selling page of NIRI's website.  


13D Reform

Current SEC requirements require a Schedule 13D to be filed by any invester or group of investors that becomes a 5 percent holder within 10 days after crossing the 5 percent threshold.  Based on technology improvements over the last several decades and the speed at which information now flows, NIRI sees no reason for such a delay in reporting this material shareholder ownership information. NIRI believes reporting rules should be amended to reduce the reporting requirement to 2 days from the current 10 days. This reporting requirement should be expanded to include long and short selling information, as well as share lending.

Wachtell, Lipton, Rosen & Katz, a corporate law firm, filed a rulemaking petition in 2011 that asked the SEC to reduce the 13D filing period to one day and to adopt a broader definition of beneficial ownership. In March 2016, Senator Tammy Baldwin of Wisconsin introduced a bill that seeks a two-day filing period and tighter restrictions on the ability of activist funds to collude as "wolf packs." In NIRI's 2016 Advocacy Issues Survey, 91 percent of respondents said they "agree" or "strongly agree" with these efforts to modernize the 13D rules.

Resources

Wachtell, Lipton, Rosen & Katz, "Commentary: Holding Activists and Proxy Advisory Firms Accountable?" New York Law Journal (May 2016)

Senator Tammy Baldwin, S. 2720: Brokaw Act Legislation (introduced March 2016)

Wachtell, Lipton, Rosen & Katz, Petition for Rulemaking on Schedule 13D of the Securities and Exchange Act of 1934 (March 2011)
 

 

Proxy System Reforms

NIRI is a member of the Shareholder Communications Coalition, which is urging the SEC and lawmakers to push for the modernization of the U.S. proxy system to make it easier for companies to identify their shareholders and communicate with them on corporate governance issues.

In an April 2015 comment letter, NIRI and the coalition called on the SEC to repeal its outdated OBO-NOBO (Objecting Beneficial Owner/Non-Objecting Beneficial Owner) rules that make it more difficult and costly for companies to communicate with their "street name" shareholders. The coalition reiterated these points in an April 2016 comment letter in response to the SEC's rulemaking on transfer agents.  

NIRI also wrote a commentary for CFO.com in 2014 on the need for these important reforms: "Shareholder Engagement Should Be a Two-Way Street," April 2014. In June 2013, NIRI's CEO testified before the House Financial Services Committee on proxy reform issues.

In 2010, the SEC published a concept release on the U.S. proxy system that addressed OBO-NOBO, "empty voting" and "over voting," vote confirmation, and other proxy voting issues. Here is a link to the comment letter that NIRI submitted on these issues. NIRI also prepared a comment letter in 2013 regarding proposed changes to proxy distribution fees.