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It's supposed to be a new era of straightforward financial disclosure, but the times have yet to catch up with certain big money managers.

Making use of a pre-


-era securities rule, dozens of money managers -- with the blessing of the

Securities and Exchange Commission

-- are keeping the public from information about their stock holdings until months and some cases years after they've traded them.

The 1975 rule is an exception to an SEC regulation requiring investment managers with more than $100 million in stocks to file a Form 13-F listing all of their holdings at the end of each quarter. The little-known exception permits a select group of money managers to keep some or all of their Form 13-F filings confidential if the disclosure would somehow divulge a secret trading pattern or cause undue harm to their investment strategies.

Hedge funds, Wall Street institutions and asset management firms that have routinely taken advantage of this confidentiality exception include Warren Buffett's

Berkshire Hathaway



Lehman Brothers



UBS Warburg


CIBC Worldmarkets


Milton Arbitrage Partners


SAB Capital Advisors


Chesepeake Bay Partners

. Even chip giant


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, which maintains a large investment portfolio, has made use of the confidentiality provision from time to time.

Advocates of corporate reform say it's time for the SEC to do away with the confidentiality exception -- especially when the SEC itself is passing rules to require more frequent and comprehensive disclosures by mutual fund managers and corporations.

"I think it's time we take another look at this," said Nell Minnow, editor of The Corporate Library, a corporate governance research organization. "I don't think the

reporting requirement is overly intrusive to begin with. We don't have the time or the patience for this kind of subversion of the disclosure requirements."

Reform advocates like Minnow say there's little reason for big money managers to keep secret their stock holdings, because much of the information in a Form 13-F is already weeks old. They note that the forms aren't filed with the SEC until 45 days after the end of each quarter -- a virtual eternity in today's fast-moving markets.

City Hall

In certain cases, in fact, an argument can be made that the confidentiality exception does more harm than good.

The SEC, for instance, repeatedly permitted hedge fund manager Kenneth Lipper to keep a portion of the Form 13-F filings for his

Lipper & Co.

convertible bond fund hidden for as much as a year at a time. Now, Lipper and his onetime $4 billion empire, which collapsed early last year, are being investigated by the SEC for allegedly mispricing the fund's assets and possibly altering the fund's investment strategy. Some of Lipper's celebrity investors, who include Sen. Ernest "Fritz" Hollings (D., S.C.), Julia Roberts, Liam Neeson and

NBC Today

show host Matt Lauer, are suing Lipper to recoup their losses.

A review of Lipper's nonconfidential Form 13-F filings, many of which are just becoming public now, reveals that the fund was more heavily invested in convertible bonds of companies with poor credit ratings than previously believed. The fund's marketing brochure had said the fund would invest 70% of its assets in investment-grade convertible bonds -- a hybrid security that pays both interest and converts into stock when the issuing company's shares reach a certain price.

But a Form 13-F filing for the period shows that it held convertible bonds issued by a number of speculative biotech companies or financially troubled companies such as







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A Lipper spokesman said the confidentiality had been requested to protect the hedge fund's trading strategy and not to conceal any holding for the fund investors. The spokesman said that every year, Lipper investors were provided with information about the fund's specific holdings.

Unfounded Panic

The confidentiality exception also can leave investors, especially those who try to track every movement of a big money manager, with the wrong impression about a particular fund's stock holdings.

Five years ago, a Form 13-F filing by Berkshire Hathaway sparked a minor panic in the trading of

Wells Fargo's

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stock, because investors mistakenly thought the investment guru had dumped all his shares of the San Francisco-based bank. It later turned out that Berkshire Hathaway was still holding a significant stake in the bank. But Berkshire Hathaway, as it often has, had gotten permission from the SEC to keep some of its stock holdings confidential.

The run on Wells Fargo's stock prompted the first hard look at the confidentiality exception, and moved the SEC to stiffen its internal guidelines for granting such requests. And it has made a difference. A review of recent Form 13-F filings reveals that the SEC does reject the majority of confidentially requests.

But a higher rate of denials doesn't tell the whole story. That's because any money manager can request confidentiality and is given the benefit of the doubt until the SEC rules on the request. The problem with that is that it can take the SEC many months before it decides on the request, and a money manager can in essence get a free pass during that waiting period.

That's more or less what happened with a recent Form 13-F filing by

Goldman Sachs

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for the quarter ended June 30, 2002. Goldman didn't submit a complete filing until Jan. 31, 2003, after the SEC denied a request for confidential treatment for the 250-page document, which lists $37 billion worth of stock holdings, including options positions.

Goldman declined to comment on the reason behind the request. But it isn't the first time Goldman has asked for confidentiality, only to be turned down by the SEC several months later. Something similar happened with the firm's 13-F filing for the quarter ended March 30, 2002, and the one for the quarter that ended Sept. 30, 2001.

De Facto

In some instances, the SEC has taken nearly a year to reject a request for confidentiality. That's what happened with several 13-F filings submitted last year by Gotham Partners, the embattled New York hedge fund that's now under investigation by the SEC and New York Attorney General Eliot Spitzer because of its trading activities in some stocks.

On Jan. 29, the SEC rejected Gotham's request for confidential treatment on four Form 13-F filings covering several reporting periods, one of which dates as far back as Dec. 31, 2001. Some of the stocks listed on those now-public reports include Gotham's financial interest in two stocks that are the subject of the current regulatory inquiry:

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Douglas Scheidt, associate director of the SEC's investment management division, acknowledges that "there is the potential for abuse" in the 13-F filing process. But he contends that more frequent denials of requests for confidential treatment are starting to deter some money managers from making the request in the first place.

Supporters of the current filing system contend that the SEC needs to allow money managers the option of keeping some information confidential, especially in instances in which a fund is engaged in a sophisticated hedging strategy to reduce its exposure to a misstep in a pending corporate merger or other major market event.

"In some cases, privacy is instrumental for them to carry out an investment strategy," said securities lawyer Peter Ingerman, a partner with Chadbourne & Parke in New York. "If there is a perception of abuse, then the SEC should bring an enforcement action."