Interpretive Release Division of Investment Management's Interpretive Positions Relating to Rule 13f-1 and Related Form 13F 34-15292

(21 Kobrinwas associatedwilh Registrantfrom in or
aboutAugust,1976to on or about October1' 1978.
(3) From in or about November,1976,to at least in
or about March,1977,al a time when Registranthad
associated with it both Kobrin, who had been
criminallyconvictedof securitieslaw violations,and a
person who has been enjoined for securities law
violations,RegistrantwillfullyviolatedSection15(b)
of the ExchangeAct and Rule 15b10-4(c)thereunderin
that Ftegistrantfailed to establish,maintain,and
enforcewrittenproceduresrelatingto the supervision
of customeraccountsas prescribedby the aboverule.
(4) ln or about March, 1977, at a time when
Registranthad associatedwith it both Kobrin, who
had been criminally convicted of securities law
violations,and a person who had been enjoinedfor
securitieslaw violations,Registrantwillfullyviolated
Section15(b)of the ExchangeAct and Rule 15b10-6
thereunderin that Registrantfailed to obtain the
signatureof a supervisoron each customeraccount
card.
It is thereforein the public interest to impose the
sanctionspecifiedin the offer of settlement.
Accordingly,lT lS ORDEREDthat, effectiveat the
openingof businesson the second Mondayafter the
date of this order,Donald& Co. SecuritiesInc'' be
and herebyis censured.
GeorgeA. Fitzsimmons
Secretary
SECURITIES	EXCHANGEACT OF 1934
RefeaseNo. 15292/November	2, 1978
Division of InvestmentManagement'sInlerpretative
PositionsRelatingto Rule13f-1and RelatedForm13F
AGENCY: Securitiesand ExchangeCommission.
ACTION: lnterpretativerelease,
SUMMARY: The Securitiesand ExchangeCommis-
sion today authorizedthe issuance of a release
reflectingthe views of the Divisionof Investment
Managementregardingthe reportingobligation and
filing requirementof certaininstitutionalinvestment
managersunder the Commission'srecentlyimple-
mentedinstitutionaldisclosureprogram.Since the
program'simplementationwas announced,on June
15, 1978,the Divisionof InvestmentManagementhas
receivedrequestsfor interpretationswith respect to
variousaspectsof its requirements.This interpretative
releaseis intendedto assist interestedpersons in
their understandingof, and compliancewith, that
program.
EFFECTIVE	DATE: November2,1978.
FORFURTHERINFORMATION	CONTACT:
MichaelS. Llchtenthal,Esq. (202-755-9034)	or
W. Scott Cooper,Esq. (202-755-1792')
Divisionof lnvestmentManagement,
Securitiesand ExchangeCommission,
500 North CapitolStreet
Washington,D.G.20549.
SUPPLEMENTARY	INFORMATION:Section13(f)of
the securitiesExchangeAct of 1934("ExchangeAct")
[15 U.S.C.78a et seq. as amendedby Pub. L. No.
94-29(June4, 1975)lwas adoptedby Congressas part
of the SecuritiesActs Amendmentsof 1975.Generally
S e c t i o n1 3 ( f ) [ 1 5 U . S . C . 7 8 m ( f) ] e m p o w e r st h e
Commissionto adopt rules which would creale a
reportingand disclosuresystem to collect specific
informalionconcerningSection13(dX1)[15 U.S.C.
78M(dX1)lequity securitiesheld in accountsover
w h i c h c e r t a i ni n s t i t u t i o n a li n v e s t m e n tm a n a g e r s
exerciseinvestmentdiscretion.The reportingsystem
requiredby Section13(f) is intendedto create in the
Commissiona central repositoryof historical and
c u r r e n t d a t a a b o u t t h e i n v e s t m e n ta c t i v i t i e s o f
institutionalinvestmentmanagers.
On June 15, 1978,the Commissionannouncedthe
adoptionof Rule13f-1[17CFR 240.13f-1]and related
Form 13F [17 CFR 249.3251inExchangeAct Release
No. 14852,effectiveJuly3'1,1978,[43 FR 26700,June
2 2 , ' 1 9 7 8 1 ,i m p l e m e n t i n gt h e b a s i c i n s t i t u t i o n a l
disclosureprogrammandatedby Section13(f). Under
the Rule, as adopted,an institutionalinvestment
managerexercisinginvestmentdiscretion(as defined
in Section3(a)(35)o! the ExchangeAct [15 U.S.C.
78(c)(a)(35)l)	with respectto accountshavingmore
than $'100,000,000	or more in exchange-tradedor
NASDAQ-quoted	equitysecuritieson the last trading
day of any of the twelvemonths of a calendaryear
must file annuallywith the Commission,and, if a
bank,with the appropriatebankingagency,within 45
days after the last day of such calendaryear, Form
13F,beginningwith the calendaryear1978.The form
requiresthe reportingof the nameof the issuer,and
the titleof class,CUSIPnumber,numberof sharesor
principalamountin the caseof convertibledebt, and
aggregatef air market value of each such equity
security held. The form also requiresinformation
SEC DOCKET/g

T h e f o l l o w i n g a r e i n t e n d e d t o
explanationand analysis of Rule
Form 13F set forth in Exchange
14852,and reflect the views of the
date of this release.
1. Reportingrequirements.Who
Report?
concerningthe nature of investmentdiscretionand
votingauthoritypossessed.l
Since the adoption of the Rule, the Commission's
Divisionof InvestmentManagement(,'Division")has
receivedrequests for interpretationswith respect to
various provisionsunder the Rule and the related
Form. In order to assist other persons in their
understandingof, and compliancewith, the Rule, the
Commissionhas authorizedthe publicationof this
interpretative	releasesettlngforth the currentviewsof
the Division.
however, that, by rule, investment discretion is
deemedto exist with respect to all accounts over
which any person under control of such natural
personor company(such as subsidiaries)exercises
investmentdiscretion.
Quesllon: When a managed account is an insti-
tutional account such as a pension or endowment
fund, when is investmentdiscretion,,sole"and when
is it "shared"?
A n s w e r : l t d e p e n d so n w h i c h m o s t a c c u r a t e l y
reflectsthe natureof investmentdiscretionpossessed
by the manager.lf the managermakes all decisions,
thenof coursehe hassole investmentdiscretion.lf he
merelymakesrecommendationsto internalmanagers
of the account,which maketheir own decisions,then
he does not haveinvestmentdiscretionat all.3 lf the
decision-makingcan best be described as joint
decision-making,then investmentdiscretion should
be reportedas shared.
Queslion: Doesthe foregoinganswer also apply if
the managedaccount is an investrnentcompany or
separaleaccountof an insurancecompany?
Answer: Yes.
Questlon: lf, following the above, an investment
adviserhas sole investmentdiscretionover portfolio
securities of an investment company, does the
investmentcompanyhave any reporting obligations
regardingsuch securities,includingthat of fiiing an
informationstalement?
Answer: No. Again,reportingobligationsrelate to
the possessionof investmentdiscretion.
Question: In determiningwhetherinvestmentdiscre_
tion is sole,sharedor none, is the determination(and
response)to be givenin terms of particularsecurities
withinan account,or as to the accountas a whole?
Answer: The account as a whole, reflecting the
statutoryprovision(Section13(f))itsetf.
Question: In the caseof a pensionf und placedin an
entity such as a mastertrust which is divided into
segmentsfor the purposesof investmentmanage-
ment, each segmentbeing assigned to a separate
the operationof the provisionsof this title
and the rulesand regulationsthereunder.
3 U n l e s s h e o t h e r w i s ep o s s e s s e st h e a u t h o r i t y
(contemplated	by Section3(aX3S)(A) ol the Exchange
Act) to determinepurchasesand sales.
s u p p l e m e n tt h e
13f-1 and related
Act ReleaseNo.
Divisionas of the
is Required to
Queslion: lf a naturalpersonor companyadvisesan
account, but does not have de jure or cle tacto
investmentdiscretionover the account,is it.required
to reportin respectof such account?
Answer: No. The reporting reguirementsapply to
personswho have"investmentdiscretion,'as defined
in Section 3(aX35) of the Exchange Act.2 Note,
1 The Releaseannouncingthe adoption of the Rule
sought commentsconcerningthe usefulness and
costsassociatedwith quarterly,as opposedto annual,
reporting. The Division is presenily reviewingthe
numerouscommentsit has receivedconcerningthat
matterandwill be in a positionto makea recommenda-
tion to the Commissionin the nearfuture.
2 Section3(aX35)states:
A personexercises,,investment
discretion"
with respectto an account if, directly or
indirectly,such person(A)=isauthorizedto
determinewhat securitiesor other property
shall be purchasedor sold by or for the
account,(B) makesdecisionsas to what
s e c u r i t i e so r o t h e r p r o p e r t y s h a l l b e
purchasedor sold by or for the accounteven
t h o u g h s o m e o t h e r p e r s o n m a y h a v e
responsibilityfor such investmentdeci_
sions, or (C) otherwise exercises such
influencewith respectto the purchaseand
saleof securitiesor other propertyby or for
the accountas the Commission,by rule,
determines,in the publicinterestor for the
protectionof investors,shouldbe subiectto
1OlSEC	DOCKET
)

manager,what is the "account"with respectto each
such separatemanager:is it the entire pensionfund
or the segmentassignedtp the manager?
Answer: lt is the segmentassignedto the manager.
Questlon: In the foregoingsituation,if there is one
managerassignedthe role of reviewingand approving
the decisionsof the various separatemanagersand
which receivesa fee for this activity (in additionto a
feelor any administrative	duties),wouldthis manager
reportas having"shared"investmentdiscretion?
Answer: lt is most probablethat this activity, for
which a fee is received,is a form of sharedinvestment
discretion.
Quesllon: Could a natural person investingfor his
own account be subject to the reporting require-
ments?
Answer: No, Section 13(fX5)of the ExchangeAct
[ 1 5 U . S . C . 7 8 m ( f ) ( 5 ) ]e x c l u d e sn a t u r a l p e r s o n s
investingfor theirown accountsfrom the definitionof
"institutionalinvestmentmanager."
Questlon: lf a natural person (e.9., a trustee) has
investmentdiscretionover an accounthavingat least
g10Omillion in 13(f)securitiesof anotherperson(as
defined in Seciion 3(aXg) of the ExchangeAct [15
U.S.C.78(cXaXg)ltoinclude a "natural person,com-
pany,government,or politicalsubdivision,agency'or
instrumentality	of a government"),would the natural
personbe subjectto the reportingrequirements?
Answer: Yes, Seotion13(f)(5)of the ExchangeAct
i n c l u d e s n a t u r a l p e r s o n s i n t h e d e f i n i t i o n o f
" i n s t i t u t i o n a li n v e s t m e n tm a n a g e r "w h e n s u c h
p e r s o n se x e r c i s ei n v e s t m e n td i s c r e t i o no v e r t h e
account of any other person. Note that a natural
person investing for his or her own account and
managingthe accountsof other persons could be
requiredto reportif the accountsof the otherpersons
have in the aggregateat least $100million in 13(f)
securities,althoughthe valueof the securitiesin the
accountof the naturalpersonwould not be included
in determiningwhether the natural person met the
$100 million threshold.Similarly,in the case of a
partnershipwhich exercises investment discretion
over various accounls, the personalinvestmentsof
the individualpartnerswould not be aggregatedwith
the holdingsor advisoryaccountsof the partnership.
Queslion: Doesa person who exercisesinvestment
discretionwith respectto an accountorganizedby or
underthe auspicesof a governmental	authority(e.9.,
Q'{nunicipalpensionfund) have to report, assuming
tiib basic reportingcriteria are mel?
Answer: Yes.
Question: Would the parentof a corporatecomplex
with five subsidiariesbe requiredto report if none of
the subsidiarieshad at least $100 million in 13(f)
securities?
Answer: Yes, if in the aggregateits subsidiarieshad
investmentdiscretion over $100 million or more of
Section13(f)securities.UnderRule'l3f-1(b)[17 CFR
240.13f-1(b)]an institutional investmentmanager
would be deem6dto exerciseinvestmentdiscreiion
over all accountswith respectto which any person
under its control exercisesinvestmentdiscretion.In
addition,underSpeciallnstructionv to Form 13Fthe
parentwould be deemedto have shared investment
discretionwith eachof its subsidiarieswith respectlo
the specific 13(f) securities under their respective
control. However,since none of the subsidiaries
would have investmentdiscretion-overat least $100
millionin 13(f)securitiesthey would not haveto be
namedin ltem 7 of Form 13F.
2. Mechanicsof Reporting
Question: In the situationdescribedin the immedi'
ately precedingquestion,how would the reportingbe
accomplished?
Answer: lf none ol the subsidiariesindividuallyhad
investmentdiscretionover$100millionin 13(f)securi-
ties, then, as explained above, only the parent
corporalionwould havea filing obligation.Therefore,
the parentwouldsimplyaggregatethe holdingsof its
subsidiariesand check sharedinvestmentdiscretion
underltem6(b)withoutnamingthe subsidiaries	either
on the coverpageor in ltem 7.
Question: What if one or more such subsidiarydid
haveinvestmentdiscretionover$100million in 13(f)
securities?
Answer: lf one or more of the subsidiarieswere to
haveinvestmentdiscretionover$100million in 13(f)
securities,then it too would havea reportingobliga-
tion. As such, there would then exist two possible
reportingpersons.However,underGenerallnstruction
B to Form 13F only one managercould include
informationwith respectto a givensecurity.Thus, if
the parentwereto file the reportfor both, it would list
separatelythe holdings of its other subsidiaries,
which it would report in the aggregate.The parent
corporationwould check ltem 6(b) (indicatingshared
investmentdiscretion)for all of the entrieson the
Form, but would only namethe subsidiaryhavinga
'reportingobligationin responseto ltem 7. Pursuantto
Special Instructioni that subsidiarywould also be
named on the cover page of the Form filed by the
parentcorporation.ln addition,that subsidiarywould
, -
SECDOCKET/14

file a cover pageand a separatestatementindicating
that its parentwould be filing on its behall.
lf, in the above situation, the subsidiary with a
reportingobllgationwere to file on its own behalf,
then it too would check ltem 6(b) for all entriesand
name its parent in ltem 7. The parent would then
includea statemenlwith its reportindicatingthat the
subsidiarywould be filing on behalfof the parent.
Question: For purposesof ltem 6(b) of the Form,
would investmentdiscretionbe deemedshared if a
subsidlary exercisesinvestment discretion without
interferencefrom its parent?
A n s w e r : Y e s , S u b s e c t i o n1 3 f - 1 ( b )s t a t e s : , , A n
i n s t i t u t i o n a l i n v e s t m e n tm a n a g e r s h a l t a l s o b e
d e e m e d t o e x e r c i s e' i n v e s t m e n td i s c r e t i o n 'w i t h
respect to alf accountsover which any person under
its control exercisesinvestmentdiscretion."
Queslion: Can ltem 6(b) and ltem 6(c) both be
checkedwith respectto the samesecurities?
Answer: Yes. This would be appropriatewhere,for
example, a parent was reporting in respecl of a
subsidiary(6(b))which shares investmentdiscretion
with anotherperson(suchas a co-trustee- 6(c)).
Ouestion: How would holdings be reported by a
parentfor a multi-tieredcorporatestructurewherethe
parent,its mid-levelsubsidiary,and lower level sub-
sidiaryare all reportingpersons?
Answer: The securitiesover which the lower-level
subsidiaryexercisesinvestmentdiscretionwould be
listed separately,and ltem 6(b) would be checkedto
indicate shared investmenntdiscretion. In ltem 7,
both the mid-level subsidiary and the lower-level
subsidiarywould be named in accordancewith the
instructionsto indicatethat they have sharedinvest-
ment cliscretionwith the parent. Any additional
s e c u r i t i e sw i t h r e s p e c t t o w h i c h t h e m i d - l e v e l
subsidiaryexercisesinvestmentdiscretionwould be
reportedin a similar manner,noting in ttem 7 that
investmentdiscretionis sharedwith the parent. Of
course,the parentwould indicatethat it is filing on
behalfof the two subsidiarieson the coverpage,and
each subsidiarywould file an informationstatement
indicatingthai its parentwould be filing on its behalf.
By the Commission.
GeorgeA. Fitzsimmons
Secretary
SECURITIES	EXCHANGEACT OF 1934
ReleaseNo.1S289/November	t, 197g
LOSTAND STOLENSECURITIES	PROGRAM
Extension of the Pilot period; Redesignationot
SecuritieslnformationCenter,Inc.; Fleregistration	of
CertainInstitutions.
AGENCY: Securitiesand ExchangeCommission.
ACTION: Notice of the extensionof the Lost and
Stolen Securities Program's(the ,'program',)pilot
period, the redesignationof Securities Information
Genter,lnc. ("SlC")as the Commission,sdesigneeto
maintainand operatethe data base of missing, lost,
counterfeitor stolensecurities,and the reregistration
of certaininstitutionssublectto Rute 17f-1(17 CFR
5240.17f-1)	with SlC.
SUMMARY: This actionextendsthe program'spilot
period until June 20, 1979,redesignatesSIC as the
Commission'sdesigneefor a period of two years
beginningJanuary1, 1979,and requirescertaininsti-
tutions subject to 5240.17f-1to register with StC
utilizinga revisedregistrationform beforeDecember
15, 1978.
EFFECTIVE	DATE: November1, 1g7B
FOR FURTHERINFORMATTON	CONTACT: Gregory
C. Yadley,Dlvisionof MarketRegulation,Securities
and ExchangeCommission,Washington,D.C. 20549
(202l 376-8129.
SUPPLEMENTARY	INFOFMATIONi:The Commis-
sion todayannouncedthe extensionof the program,s
pilot perioduntil June 30, 1979,the iedesignationof
SIC as the Commission'sdesigneeto maintainand
operalethe computerizeddata base of missing, lost,
counterfeitor stolen securitiesfor a period of two
yearsbeginningJanuary1, 1979,and the reregistra-
tion of certaininstitutionssubjectto Rule 17t-1(.17,
CFR5240.17f-1)	with StCbeforeDecember15, 1978.1
In addition,all institutionswhich registeras direct
inquirersanddirectinquirerswho fail to submita new
registrationform indicatinga changeof status in
a c c o r d a n c ew i t h i n s t r u c t i o n sc o n t a i n e di n t h e
Appendixwill be chargedfor SIC'sservicesaccording
to an estirnatedrevisedfee schedulebeginning on
J a n u a r y1 , 1 9 7 9 .
1 Both the pilot periodand SIC's originatperiodof
designationwill expireon December31. .197g.
12/SECDOCKET