[Practical Personal Finance] Why Is Form 13F Disclosed 45 Days Late?... A Tug-of-War Between Transparency and Information Asymmetry

A compromise between the SEC and institutional investors
Reflecting the legislative intent of enhancing public access to information
Similar yet different from Korea's 5% large-shareholding report regime

The so-called "13F," a quarterly report in the U.S. securities market that discloses institutional investors' holdings, was not introduced merely as an investment reference tool. The starting point of the system’s design was securing market transparency.

Form 13F was introduced in 1975 when the U.S. Congress added Section 13(f) to the Securities Exchange Act. The supervisory authority is the U.S. Securities and Exchange Commission (SEC). At the time, Congress chose to collect past and present data on institutional investors’ activities at the SEC. By aggregating this data and regularly disclosing the holdings of large institutions, the system was introduced with the aim of enhancing public access to information, boosting investor confidence, and thereby maintaining fairness and order in the market. Institutional investors with assets under management of 100 million dollars or more must disclose, within 45 days after the end of each quarter, the number of shares of long positions in stocks or exchange-traded funds (ETFs) they hold. Short positions, bonds, and cash are not subject to reporting.

Information accessibility and the 45-day reporting delay... A compromise between the SEC and institutional investors

The legislative intent of public access to information has so far been regarded as the most important reason for publishing 13F reports. In July 2020, the SEC proposed an amendment to raise the 13F reporting threshold from the existing 100 million dollars to 3.5 billion dollars. This was the first adjustment to the threshold in 45 years. At the time, the SEC argued that the threshold needed to be updated to reflect the significant changes in the size and structure of the stock market.

However, the proposed amendment faced strong opposition. According to the SEC’s proposal, if the higher threshold had been implemented, only about 550 of the roughly 4,500 13F filers would have remained subject to reporting obligations. In other words, close to 90% of institutions would have been excluded from the disclosure requirement. The SEC explained that although the total number of filers would drop sharply, most of the assets currently subject to disclosure would still be covered. Nonetheless, Congress and investor protection groups criticized this as a "retreat from market transparency." Listed companies on the New York Stock Exchange and members of the U.S. Democratic Party also pointed out that the legislative intent was to "expand public access to information on institutional investors’ holdings," and argued that narrowing the reporting scope could weaken the market’s monitoring and oversight functions. In particular, concerns were raised that external oversight of large hedge funds could be weakened. In response, the SEC officially withdrew the proposed amendment in June of the following year.

The other key pillar of the 13F system, the "45-day reporting delay," is understood as a measure to mitigate the risks of strategy exposure and front-running. If institutional investors’ trading strategies were disclosed immediately, there would be a risk of market distortion as competing investors could either follow or exploit those strategies. In fact, when the SEC announced the 13F reform proposal in 2020, institutional investors expressed concern that the very disclosure of 13F information could reveal "proprietary" investment strategies and expose them to front-running or copycat trading. Thus, by disclosing institutional portfolios 45 days later, a compromise was sought between information transparency and investment autonomy.

Of course, the delayed disclosure method has clear limitations. Institutions still retain an informational advantage regarding their current positions, while the information available to individual investors is historical data as of the end of the previous quarter. This is why time-lag risk must be taken into account when using 13F filings as investment signals.

Similar yet different: Shareholding disclosure in Korea and the United States

In that it makes shareholdings public, the system is similar to Korea’s 5% large-shareholding report regime, but there are also clear differences. In Korea, when an investor comes to hold 5% or more of a listed company’s shares, they must promptly disclose their purpose of holding, source of funds, and the shareholdings of related parties, thereby quickly informing the market of any potential changes in control. Additional reporting is required when there is a change of 1% or more in the shareholding, placing emphasis on real-time disclosure. This serves as a mechanism to transparently reveal control disputes and shifts in influence in a corporate governance environment centered on controlling shareholders.

By contrast, the U.S. 13F system focuses on regularly disclosing institutional investors’ overall portfolios rather than on control over the governance of specific companies. Another difference is that the reporting obligation is imposed based on assets under management, not on the ownership percentage of individual stocks. Put simply, while Korea’s system is centered on "control monitoring," the U.S. system is centered on "portfolio transparency."

Where is the best place to view 13F filings?

The original 13F filings can be accessed directly on the SEC’s electronic disclosure system, EDGAR. However, because they are published in English, those who want easy access can also view them through securities company applications (apps). Within the NH Investment & Securities app "Namu Securities," the "Big Player PICK Service" uses 13F disclosures to provide portfolio information for investors such as Warren Buffett (Berkshire Hathaway), Stanley Druckenmiller, Ray Dalio, and Cathie Wood, who is widely known as the "Money Tree Sister." It shows the previous quarter’s portfolio and indicates whether each stock in the portfolio is a new buy, additional buy, partial sell, or full sell, allowing users to see trading trends and portfolio changes at a glance. In addition, it provides explanatory content on the reasons for buying and selling each stock. There is also a "One-Click Order" function that allows users to bundle and order the stocks invested in by these big players. Investors can buy the top 10 holdings in each master investor’s portfolio in proportion to that investor’s actual holding weights.