The Story On The Fairholme Funds Missing Federal Home Loan Mortgage Corp (OTCBB:FMCC), Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) Stakes

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Bruce Berkowitz, Fairholme Fund

Bruce Berkowitz, Fairholme Fund

The Fairholme Fund filed it’s latest 13F today and noticeably absent was it’s position in the Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA). Investors need look no further then the accompanying document to see reasoning:

For purposes of this Form 13F-HR for the third quarter of 2014, the filer is not disclosing its holdings in both Federal Home Loan Mortgage Corp and Federal National Mortgage Association, because such securities are not included on the Official List of Section 13(f) securities released by the Securities and Exchange Commission.

The SEC defines which securities are to be listed on Form 13Fs on the SEC 13F-FAQ Page. Question 7 on that page in particular addresses this issue. I excerpt:

The Official List of Section 13(f) Securities primarily includes U.S. exchange-traded stocks (e.g., NYSE, AMEX, NASDAQ), shares of closed-end investment companies, and shares of exchange-traded funds (ETFs).  Certain convertible debt securities, equity options, and warrants are on the Official List and may be reported.

Securities that are not on the Official List should not be reported on Form 13F.

Fannie Mae and Freddie Mac are both traded over the counter and not U.S. exchange-traded stocks and Fairholme’s stake was primarily composed of preferred shares which are not to be filed.

Oct 1st Letter to Investors showed commitment to legal battle and stakes

“We remain steadfast in our belief that — at a minimum –- shareholders are due just compensation,” Berkowitz said in a letter to investors dated Oct. 1 about the Fannie-Freddie stake. “We will continue to pursue our legal rights.”

Fairholme will continue to have to disclose the stakes to it’s own fund investors twice a year, but will not in Form 13F per rules.

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  • spd

    shareholders must be compensated for this temporary government stole.

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