SEC Sanctions Investment Managers for Failure to Report on Forms 13F and 13H

On Sept. 17, 2024, the U.S. Securities and Exchange Commission (SEC) announced settled charges against 11 investment management firms for failing to file Form 13F, the quarterly public report required of any institutional investment manager who oversees a portfolio of at least $100 million of certain U.S.-listed securities.

Two of the sanctioned firms also were charged with failing to file Form 13H, the confidential SEC filing required on the part of “large traders.”

Nine of the managers charged agreed to pay civil fines totaling more than $3.4 million, with individual fines ranging from $175,000 to $725,000. Two of the firms avoided fines on the basis that they had self-reported their violations and otherwise cooperated with the SEC’s investigation. For the same reason, another firm paid no fine in respect of the Form 13H aspect of its settlement. Each of the firms made several remedial filings covering the time period during which it had failed to report as required.

Form 13F

Form 13F is a quarterly filing required under Section 13(f) of the Securities Exchange Act of 1934 on the part of any “institutional investment manager” that exercises investment discretion over at least $100 million of so-called Section 13(f) securities. That term primarily refers to U.S. exchange-traded stocks, shares of closed-end investment companies and shares of ETFs, and also may include certain other equity-related securities.  

Form 13F provides a snapshot of the manager’s quarter-end holdings of Section 13(f) securities and is due within 45 days after the quarter end. A manager determines which of its securities positions are subject to reporting by consulting the SEC’s quarterly “official list” of Section 13(f) securities.

Form 13H

Form 13H is required on the part of any “large trader,” essentially meaning any manager that exercises investment discretion over accounts that trade more than a threshold volume of U.S. exchange-listed securities. The obligation to file Form 13H is triggered if the manager trades: (i) on any single day, either two million shares or shares with a market value of $20 million, or (ii) during any single calendar month, either 20 million shares or shares with a market value of $200 million.

A manager must file its initial Form 13H promptly after exceeding one of the referenced thresholds, and thereafter is subject to annual and potentially quarterly amendment requirements.

Non-U.S. and Non-Registered Investment Managers Are Covered

The obligation to file Form 13F or Form 13H applies to foreign and U.S. managers alike, and does not depend on the manager being an SEC-registered investment adviser.

Two of the firms sanctioned by the SEC were foreign entities not registered in any capacity with the SEC.

Key Takeaways

These enforcement actions are a reminder for firms managing assets in the U.S. public equity market to stay aware of their potential Form 13F and/or Form 13H reporting obligations, depending respectively on portfolio value and trading volume. More broadly, given the range of recent SEC initiatives concerning securities-related disclosure requirements, managers may wish to reevaluate their overall policies and procedures in that area.

For example, the new Schedule 13G quarterly amendment regime takes effect on Sept. 30, 2024, and the SEC’s 2023 enforcement sweep addressed compliance with disclosure obligations under Section 13(d) and Section 16 of the Exchange Act.

Managers also should be aware of the recently inaugurated annual say-on-pay voting disclosure requirement on Form N-PX and the monthly short-position reporting regime scheduled to take effect in January 2025.

For more information, please contact the Barnes & Thornburg attorney with whom you work or Scott Budlong at 646-746-2036 or sbudlong@btlaw.com.

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