SEC Brings Charges for Failure to File Forms 13F (Investment Manager Share Positions) and 13H (Large Trader Registration)

The SEC’s September 17, 2024, actions signal its commitment to penalize non-compliance, while encouraging market participants to self-report violations.

On September 17, 2024, the US Securities and Exchange Commission (SEC) announced charges against 11 institutional investment managers for failing to file Forms 13F and 13H. All parties settled the charges. These charges signal the SEC’s willingness to bring enforcement actions and impose sanctions against market participants for failures to make these filings.

Brief Summary of Forms 13F and 13H

Form 13F

Enacted by Congress in 1975 to increase publicly available information on securities holdings of institutional investors, Section 13(f) of the Securities Exchange Act of 1934 (the Exchange Act) and Rule 13f-1 adopted by the SEC thereunder require institutional investment managers exercising investment discretion over $100 million or more in Section 13(f) securities¹ to report their holdings via quarterly Form 13F filings. These filings, due within 45 days of the end of each calendar quarter, are required to disclose to the public, among other things, the quantity and market value of each Section 13(f) security position held by the manager as of the end of the relevant quarter.

Form 13H

Adopted by the SEC in 2011 to assist it in identifying and obtaining information on market participants conducting substantial trading activity, Rule 13h-1 requires market participants to file an initial Form 13H “large trader” filing promptly after first effecting transactions of 2 million shares or $20 million in a single day, or 20 million shares or $200 million in a calendar month.² Unlike Form 13F, Form 13H is not publicly available. Upon filing Form 13H, the large trader is given a Large Trader Identification Number (LTID), which the large trader is required to share with each US broker-dealer with whom it has an account. Pursuant to Rule 13h-1, the large trader is additionally required to make annual Form 13H filings, which are due within 45 days after the end of the calendar year, and, to the extent that any information in its existing filing becomes inaccurate, quarterly Form 13H filings, which are due promptly after the end of each applicable calendar quarter.

Rule 13h-1 not only imposes obligations on market participants that effect such large trades, but also imposes a separate set of obligations on broker-dealers that have large trader customers. Among such obligations is the broker-dealer’s obligation to identify and keep records in relation to its customers that are large traders.³

History of Form 13F and 13H Enforcement Actions

Historically, neither Form 13F nor Form 13H have been areas of frequent SEC enforcement action. The SEC’s first publicized enforcement action for failure to file Form 13F was against Paramount Capital Group in 1989, resulting in a censure and order to comply with no monetary civil penalty.⁴ In 2007, Quattro Global Capital settled with the SEC for failing to file Form 13F, resulting in a censure, order to comply, and a $100,000 fine.⁵

Following the 2021 collapse of Archegos Capital Management, which never filed Forms 13F, there was renewed interest from the public regarding Form 13F and transparency for investment managers.⁶ This included calls to broaden the scope of Form 13F to cover additional financial products, such as the swaps that created the financial exposure that led to the downfall of Archegos.⁷ In 2023, additional enforcement actions for Form 13F non-compliance were brought against Artemis Wealth Investors, fined $150,000, and a religious organization and its investment arm, fined a combined $5 million.⁸

The settlement with Artemis Wealth was in relation to failure to file Form 13F over a five-year period in relation to positions which, at the end of the relevant period, encompassed 61 different 13(f) securities and amounted to a total market value of approximately $610 million. The settlement with the religious organization and its investment arm was in relation to the use of a filing structure involving the use of so-called “Clone LLCs” that allegedly sought to avoid attribution of ownership in Form 13F filings to the religious organization, the ultimate owner of the relevant securities.

Prior to the SEC’s charges on September 17, 2024, the only publicized enforcement action involving Form 13H was filed against an investment bank in July 2023. The investment bank was fined $1.4 million for failing to comply with Section 13(h) and Rule 13h-1 thereunder. Importantly, the SEC in that settlement not only alleged failures on the part of investment bank to make the required periodic filings as a large trader, but alleged failure on the part of investment bank, as a broker-dealer, to fulfill certain recordkeeping and reporting requirements in relation to the accounts of its customers that were large traders.

September 2024 Enforcement Actions

On September 17, 2024, the SEC charged 11 institutional investment managers for failing to file Forms 13F. In the case of two of the managers, the charges also included failure to file Form 13H. The Form 13F violations stemmed from failures on the part of the managers to make Form 13F filings over extended periods of time. According to the descriptions of the underlying facts in the enforcement settlements, after a period of failing to meet filing requirements, nine out of the 11 managers filed the backlog of accumulated late Form 13F filings all at once.⁹ Each of these nine managers agreed to pay monetary penalties to the SEC. The remaining two managers proactively self-reported their non-compliance with filing requirements to the SEC and received cooperation credit as these managers were not ordered to pay any monetary penalties. The SEC explained that the actions collectively illustrated “how seriously the Commission takes non-compliance as well as the benefits a firm may derive from self-reporting its noncompliance.”¹⁰

We present a high-level summary of the enforcement actions below.

As noted above, of the 11 managers charged for Form 13F violations, two also faced charges for failing to file Form 13H. These are the first publicized enforcement actions against non-broker-dealer large traders for non-compliance with Section 13(h) and Rule 13h-1. The managers, however, did not receive an additional or separate fine in relation to their failure to file Form 13H. In both cases, the manager self-reported non-compliance with 13H and the SEC said it took that into account in deciding not to impose a separate fine in connection with the Form 13H failure.

Key Takeaways

These enforcement actions constitute the SEC’s largest group of publicized enforcement actions against investment managers for failure to file Form 13F and its first publicized enforcement action against non-broker-dealer large traders to file Form 13H. As such, these enforcement actions signal that the SEC takes these filings seriously and is willing to bring enforcement actions and impose monetary penalties against market participants for failures to make them.¹¹ Finally, these actions make it clear that the SEC is trying to both reward reporting persons for self-reporting 13F and 13H violations, while punishing those that attempt to catch up on delinquent filings without proactively flagging the issue for the SEC.

This post was prepared with the assistance of Connor Jobes.

1. Official List of Section 13(f) Securities, SEC. The list primarily includes US exchange-listed equity securities, shares of closed-end investment companies, and shares of exchange-traded fund. The list also includes exchange-traded convertible debt securities, equity options, and warrants. ↩︎
2. Rule 13(h)-1 was adopted by authority of Exchange Act Section 13(h), originally adopted in the Market Reform Act of 1990. ↩︎
3. Rule 13h-1(d) and Rule 13h-1(e). ↩︎
4. SEC News Digest, June 27, 1989. ↩︎
5. In re Quattro Global Capital, LLC, Aug. 15, 2007. ↩︎
6. Bloomberg, SEC to Examine Fund Disclosure Rules After Archegos, InvestmentNews, Apr. 22, 2021; Bill Flook, Financial Reform Group Calls for Changes to 13F Reporting, Family Office Exemption Following Archegos Collapse, Thomson Reuters, Apr. 7, 2021. ↩︎
7. A recent rulemaking petition filed on April 19, 2024, requested that the SEC accelerate 13(f) reporting by reducing the 45-day filing period to no more than five business days. Petition for Rulemaking Under Section 13(f) of the Securities and Exchange Act of 1934, Apr. 19, 2024. ↩︎
8. In re Artemis Wealth Advisors, LLC, Sept. 13, 2023. ↩︎
9. Although the SEC does not expressly state this in the settlement agreements, its detection of a bulk back-dated Form 13F filings by these managers at one time appears to have assisted with its identification of non-compliance by such managers with filing requirements. ↩︎
10. Press Release, US Securities and Exchange Commission, SEC Charges 11 Institutional Investment Managers with Failing to Report Certain Securities Holdings, (Sept. 17, 2024). ↩︎
11. On September 25, 2024, the SEC settled charges against a corporation that included failure to comply with Form 13F filing requirements. Unlike the charges described herein, these charges were brought in conjunction with charges for failing to file Section 16 disclosures.