Disclosure of Short Sales and Short Positions by Institutional Investment Managers, 61678-61690 [E8-24895]
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Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations
security on or before the settlement
date.
(b) For purposes of this rule, the term
settlement date shall mean the business
day on which delivery of a security and
payment of money is to be made
through the facilities of a registered
clearing agency in connection with the
sale of a security.
By the Commission.
Dated: October 14, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–24714 Filed 10–16–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 240 and 249
[Release No. 34–58785; File No. S7–31–08;
October 15, 2008]
RIN 3235–AK23
Disclosure of Short Sales and Short
Positions by Institutional Investment
Managers
Securities and Exchange
Commission.
ACTION: Interim final temporary rule;
Request for comments.
AGENCY:
SUMMARY: The Commission is adopting
an interim final temporary rule
requiring certain institutional
investment managers to file information
on Form SH concerning their short sales
and positions of section 13(f) securities,
other than options. The new rule
extends the reporting requirements
established by our Emergency Orders
dated September 18, 2008, September
21, 2008 and October 2, 2008, with
some modifications. The extension will
be effective until August 1, 2009.
Consistent with the Orders, the rule
requires an institutional investment
manager that exercises investment
discretion with respect to accounts
holding section 13(f) securities having
an aggregate fair market value of at least
$100 million to file Form SH with the
Commission following a calendar week
in which it effected a short sale in a
section 13(f) security, with some
exceptions.
Effective Date: §§ 240.10a–3T,
249.326T and temporary Form SH are
effective from October 18, 2008 until
August 1, 2009.
Compliance Dates: An institutional
investment manager that is required to
file a Form SH report on October 24,
2008 or October 31, 2008, must comply
with Rule 10a–3T, except that it:
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DATES:
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• May exclude disclosure of short
positions reflecting short sales before
September 22, 2008 from the Form SH
report filed on either or both of those
dates. An institutional investment
manager choosing to exclude these short
sales effected before September 22 is not
required to report short positions
otherwise reportable if the short
position in the section 13(f) security
constitutes less than one-quarter of one
percent of that class of the issuer’s
securities issued and outstanding as
reported on the issuer’s most recent
annual or quarterly report, and any
current report subsequent thereto, filed
with the Commission pursuant to the
Securities Exchange Act of 1934, unless
the manager knows or has reason to
believe that the information contained
therein is inaccurate, and the fair market
value of the short position in the section
13(f) security is less than $1,000,000;
and
• Does not have to file Form SH in
XML format in accordance with the
special filing instructions posted on the
Commission’s Web site. Instead, the
institutional investment manager may
file Form SH on EDGAR in the same
manner as the form was filed pursuant
to the Emergency Orders dated
September 18, 2008, September 21, 2008
and October 2, 2008.
Comment Date: Comments on the
interim final temporary rule should be
received on or before December 16,
2008.
Comments may be
submitted by any of the following
methods:
ADDRESSES:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/final.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number S7–31–08 on the subject line;
or
• Use the Federal Rulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
Paper Comments
• Send paper comments in triplicate
to Florence E. Harmon, Acting
Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number S7–31–08. This file number
should be included on the subject line
if e-mail is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Internet Web site
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(https://www.sec.gov/rules/final.shtml).
Comments are also available for public
inspection and copying in the
Commission’s Public Reference Room,
100 F Street, NE., Washington, DC
20549. All comments received will be
posted without change; we do not edit
personal identifying information from
submissions. You should submit only
information that you wish to make
publicly available.
FOR FURTHER INFORMATION CONTACT:
Steven Hearne, at (202) 551–3430, in the
Division of Corporation Finance, Marlon
Paz, at (202) 551–5756, in the Division
of Trading and Markets, or Stephan N.
Packs, at (202) 551–6865, in the
Division of Investment Management,
U.S. Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–3010.
SUPPLEMENTARY INFORMATION: The
Commission is adopting temporary Rule
10a–3T and Temporary Form SH (Form
SH) under the Securities Exchange Act
of 1934 1 as an interim temporary final
rule. We are soliciting comments on all
aspects of the interim temporary final
rule and Form SH. We will carefully
consider the comments that we receive
and intend to address them in a
subsequent release.
I. Background
Recently, we have become concerned
that there is a substantial threat of
sudden and excessive fluctuations of
securities prices and disruption in the
functioning of the securities markets
that could threaten fair and orderly
markets. These concerns are evidenced
by our recent publication of Emergency
Orders under section 12(k) of the
Exchange Act in July 2 and September of
this year.3 In these Orders, we noted our
concerns about the possible unnecessary
or artificial price movements that may
be based on unfounded rumors and may
be exacerbated by short selling.
Short selling involves a sale of a
security that the seller does not own or
a sale which is consummated by the
delivery of a security borrowed by, or
for the account of, the seller.4 Short
sales normally are settled by the
1 15
U.S.C. 78 et seq.
No. 34–58166 (July 15, 2008) [73 FR
42379] (imposing borrowing and delivery
requirements on short sales of the equity securities
of certain financial institutions).
3 Release Nos. 34–58592 (Sept. 18, 2008) [73 FR
55169] (temporarily prohibiting short selling in the
publicly traded securities of certain financial
institutions), 34–58591 (Sept. 18, 2008) [73 FR
55175] (requiring institutional investment managers
to report short sales activities) and 34–58572 (Sept.
17, 2008) [73 FR 54875] (imposing enhanced
delivery requirements on sales of all equity
securities).
4 17 CFR 242.200(a).
2 Release
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delivery of a security borrowed by or on
behalf of the seller. Regulation SHO,
which became fully effective on January
3, 2005, sets forth the regulatory
framework governing short sales.5
Among other things, Regulation SHO
imposes a close-out requirement to
address failures to deliver stock on trade
settlement date and to target potentially
abusive short selling in certain equity
securities.
As adopted, Regulation SHO included
two major exceptions to the close-out
requirement: The ‘‘grandfather’’
provision and the ‘‘options market
maker’’ exception. Due to our concerns
about the potentially negative market
impact of large and persistent fails to
deliver, and the fact that we continued
to observe threshold securities with fail
to deliver positions that are not being
closed out under existing delivery and
settlement requirements, effective on
October 15, 2007, we adopted an
amendment to Regulation SHO that
eliminated the ‘‘grandfather’’ exception
to Regulation SHO’s close-out
requirement.6 The options market maker
provision excepted any fail to deliver
position in a threshold security
resulting from short sales effected by a
registered options market maker to
establish or maintain a hedge on options
positions that were created before the
underlying security became a threshold
security. On September 17, 2008, we
adopted and made immediately
effective an amendment to Rule
203(b)(3) of Regulation SHO to
eliminate the options market maker
exception to the rule’s close-out
requirement.7
On September 18, 2008, the
Commission issued an Emergency Order
pursuant to section 12(k)(2) of the
Exchange Act 8 requiring institutional
investment managers to report
information concerning their short sales
of section 13(f) securities on a weekly
basis.9 We amended the Order on
September 21, 2008 to clarify certain
technical issues and the public
availability of the information provided
by the institutional investment
managers.10 On October 2, 2008, we
extended the Order’s effectiveness
through October 17, 2008, and stated
that the Forms SH filed under the Order
5 17
CFR 242.200(a).
Release No. 34–56212 (Aug. 7, 2007) [72 FR
45544].
7 See Release No. 34–58572 (Sept. 17, 2008).
8 15 U.S.C. 78l(k)(2).
9 Release No. 34–58591.
10 Release No. 34–58591A (Sept. 21, 2008) [73 FR
58987].
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6 See
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would remain nonpublic to the extent
permitted by law.11
Under the terms of the Emergency
Orders, institutional investment
managers that exercise investment
discretion with respect to accounts
holding securities described in Rule
13f–1(c) under the Exchange Act 12 that
have an aggregate fair market value of at
least $100,000,000, and effect short sales
of those securities generally are required
to file Form SH with the Commission on
a weekly basis. The Form SH filing
currently must be made on the first
business day of each calendar week
following a week in which the
institutional investment manager has
effected short sales with respect to any
section 13(f) security that is not an
option.13 With respect to each
applicable section 13(f) security, the
Form SH filing must identify the issuer
and CUSIP number of the relevant
security and reflect the manager’s start
of day short position, the number and
value of securities sold short during the
day, the end of day short position, the
largest intraday short position, and the
time of the largest intraday short
position.
To make clear that continuous
reporting of open short positions
previously reported on Form SH was
not required when no new short sales
had been effected during the calendar
week covered by the next Form SH
filing due to be filed, the Emergency
Orders stated that no Form SH filing is
required when no short sales of a
section 13(f) security have been effected
since the previous filing of a Form SH.14
Further, an institutional investment
manager need not report certain
information regarding short sales and
positions that otherwise would be
reportable on Form SH if:
• The short sale or position in the
section 13(f) security constitutes less
than one-quarter of one-percent of that
class of the issuer’s section 13(f)
securities issued and outstanding, as
reported on the issuer’s most recent
annual or quarterly report, and any
subsequent current report, filed with the
11 Release No. 34–58724 (Oct. 2, 2008) [73 FR
58987–01]. Release 34–58724, together with Release
34–58591 and 34–58591A are collectively referred
to as the Emergency Orders.
12 17 CFR 240.13f–1(c).
13 Our discussion here and elsewhere in the
release regarding the need to disclose short sales
and short positions assumes that the reporting
exception, which is described in Section II.A.3,
does not apply.
14 Similarly, under the Emergency Orders no
Form SH filing is required when all short sales of
section 13(f) securities that have been effected since
the last day of the prior reporting period for which
a Form SH was due qualify for the reporting
exception.
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Commission pursuant to the Exchange
Act, unless the manager knows or has
reason to believe that the information
contained therein is inaccurate; and
• The fair value market of the short
sale or position in the section 13(f)
security is less than $1,000,000.
II. Purposes of the Interim Final
Temporary Rule
As explained in the Emergency
Orders requiring Form SH filings, and
other emergency orders under section
12(k) of the Exchange Act,15 we are
concerned by sudden and excessive
fluctuation of securities prices and
disruptions in the fair and orderly
functioning of the securities markets.
We are concerned about possible
unnecessary or artificial price
movements that may be based on
unfounded rumors and may be
exacerbated by short selling.
We note that regulators in several
foreign jurisdictions also have adopted
rules requiring disclosure of short sales
and net short positions. For example,
the Netherlands Authority for the
Financial Markets (AFM) requires daily
disclosure to the AFM of net short
positions greater than 0.25% of the
capital of financial institutions listed on
the Euronext Amsterdam stock
exchange. The UK Financial Services
Authority (FSA) requires daily
disclosure to UK exchanges of net short
positions greater than 0.25% of the
ordinary stock of UK financial
institutions listed in the United
Kingdom.
The Commission believes that
requiring the filing of the information
on Form SH will provide useful
information to the staff to analyze the
effects of our rulemakings relating to
short sales and in evaluating whether
our current rules are working as
intended, particularly in times of
financial stress in our markets. The
reports will supply the Commission
with important information about the
size and changes in short sales of
particular issuers by particular
investors. That information will be
available to the Commission to consider
when questions about the propriety of
certain short selling occur.
Because of these concerns, we are
extending the requirements to file the
Forms SH until August 1, 2009 with the
following modifications to the reporting
requirements:
• Beginning on October 18, 2008, the
Form SH weekly filing deadline will be
the last business day of the calendar
15 See also Release Nos. 34–58166 (July 15, 2008)
[73 FR 42837] and 34–58572 (Sept. 17, 2008) [73
FR 58698].
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week following a calendar week in
which short sales are effected instead of
the first business day as required by the
Emergency Orders. This change will
provide filers with additional time to
gather and verify the necessary
information and file the forms.
• Form SH filers will no longer be
required to disclose the value of the
securities sold short (currently column
5 of Form SH), the largest intraday short
position (currently column 7 of Form
SH) and the time of day of the largest
intraday short positions (currently
column 8 of Form SH). We understand
that some of this information has been
difficult for filers to obtain.
• Form SH filers will be required to
report all short positions, including
short positions effected prior to
September 22, 2008, when reporting
data elements 5, 6 and 7, Short Position
(Start of Day), Number of Securities
Sold Short (Day) and Short Position
(End of Day). We believe this additional
data will assist with our goals of
tracking short sale activity.
• The threshold for reporting short
sales or positions will be raised from a
fair market value of $1 million to a fair
market value of $10 million. We have
raised this threshold due to the new
requirement to disclose pre-September
22, 2008 short sales and positions.16
• Filers will be required to submit an
XML tagged data file to the Commission
providing the requested data. This new
requirement will facilitate the review of
the filed data by the Commission staff.
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III. Interim Final Temporary Exchange
Act Rule 10a–3T and Form SH
We are adopting interim final
temporary Exchange Act Rule 10a–3T
(Rule 10a–3T) to require institutional
investment managers to continue filing
Form SH in a form that is substantially
similar to that required by the
Emergency Orders. Adoption of the
interim final temporary rule, which will
be effective immediately and will
continue in effect until August 1, 2009,
will facilitate our review of our
regulation of short sales. We have
included several requests for comment
in this release. We will consider public
comments on Rule 10a–3T and Form SH
in determining whether we should
revise the interim final temporary rule
or Form SH in any respect, as well as
whether we should promulgate a longerterm or permanent short sale reporting
requirement upon expiration of Rule
10a–3T and Form SH on August 1, 2009.
16 Under the Emergency Orders, institutional
investment managers did not have to disclose short
sales effected, and positions held, prior to
September 22, 2008.
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We intend to address any comments
received in a subsequent release.
A. Description of Rule 10a–3T
Exchange Act Rule 10a–3T requires
certain institutional investment
managers that exercise investment
discretion 17 with respect to accounts
holding section 13(f) securities 18 to file
a nonpublic Form SH on a weekly basis
if they have effected short sales with
respect to a section 13(f) security during
the reporting period preceding the due
date of the filing.
1. Institutional Investment Managers
Required To Report Short Sales
Rule 10a–3T requires institutional
investment managers to keep track of
certain short sale transactions and file
Form SH to report them. The rule
requires the filing of Form SH by those
institutional investment managers that:
(1) As of the end of the most recent
calendar quarter, filed, or were required
to file, a Form 13F for the calendar
quarter; and (2) during a Sunday to
Saturday calendar week effected a short
sale in a section 13(f) security other than
options.19 The manager is required to
file a Form SH report with the
Commission on the last business day of
the ensuing calendar week. By limiting
the Form SH reporting requirement to
institutional investment managers that
are required to file Form 13F, we subject
only those institutional investment
managers that exercise investment
discretion with respect to accounts
holding section 13(f) securities that have
an aggregate fair market value on the
last trading day of any month of the
previous calendar year of at least $100
million to the Form SH reporting
requirement.20
We are applying the rule only to Form
13F filers because they exercise
discretion over large accounts that have
17 For purposes of this rule, the term ‘‘investment
discretion’’ has the same meaning as in Rule 13f–
1(b) under the Exchange Act. [17 CFR 240.13f–1(b)].
18 The term ‘‘section 13(f) securities’’ is defined
in Rule 13f–1(c) under the Exchange Act [17 CFR
240.13f–1(c)] to include securities of a class
described in Section 13(d)(1) of the Exchange Act
[15 U.S.C. 78m(d)(1)] that are admitted to trading
on a national securities exchange or quoted on the
automated quotation system of a registered
securities association. In determining what classes
of securities are section 13(f) securities, an
institutional investment manager may rely on the
Official List of Section 13(f) Securities published by
the Commission available at https://www.sec.gov/
divisions/investment/13flists.htm.
19 As adopted, the rule differs from the
requirement of the Order which applied to
institutional investment managers that were
required to file Form 13F for the quarter ended June
30, 2008. Because the temporary rule will be in
effect until August 1, 2009, the temporary rule
refers instead to the previous calendar quarter.
20 See 17 CFR 240.13f–1(a)(1).
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significant potential to affect the
markets. In addition, these filers already
are subject to Exchange Act reporting
and in most instances, the Emergency
Orders, and therefore are familiar with
using the Commission’s EDGAR system
to submit filings. In addition, the Form
SH reporting requirement applies only
to section 13(f) securities, which
include equity securities of a class
described in section 13(d)(1) of the
Exchange Act that are admitted to
trading on a national securities
exchange or quoted on the automated
quotation system of a registered
securities association, because this is a
useful and tested term that is wellsuited to capture the information we are
seeking.
Request for Comment
• Rule 10a–3T limits reporting of
short sales and short positions to
institutional investment managers that
are required to file Form 13F. Should
we continue to require Form SH
reporting by these institutional
investment managers? Should we
require only a subset of these
institutional investment managers to file
Form SH reports? If so, how should we
limit the type of institutional
investment manager that we require to
file Form SH? Should we instead
require a different set of persons to file
Form SH? Are there categories of
persons that conduct a significant
amount of short sales but who are not
required to submit Form SH because
they are not institutional investment
managers required to file Form 13F? If
so, which categories of short sellers
should be subject to Form SH reporting?
Would it be appropriate to require
anyone who conducts short sales or has
short positions in excess of specified
thresholds, such as those in Rule 10a–
3T(b)(2)(ii), to report?
• Are there other, better ways to
collect information about short sales
than by requiring Form SH?
• Should we require short sellers to
keep current detailed books and records
of their short sale activities and their
short positions, of the sort required
under Rule 17a–3(a)(6) under the
Exchange Act? 21 If so, should we
require short sellers to retain the name
of the broker, the number of shares, the
price, the issuer name, the time and date
of entry of the order, the time and date
of execution of the order, the type of
order (limit or market), the locate source
or exception to locate claimed, the
contact at the locate, the time and date
when the locate was received, the
amount of shares located, the time and
21 17
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CFR 240.17a–3(a)(6).
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date of the borrow, the number of shares
borrowed, the source from which they
were borrowed, and where the borrowed
shares are located? Should we require
other information be maintained?
• In the alternative, or in addition,
should we require all short sellers to
publicly provide a notice filing when
their short sale activity or positions
cross a specific threshold that would be
deemed significant? If so, what
information should the notice filing
contain? If a notice filing is required,
should it be filed with us on a
nonpublic basis? Would there be any
concerns about publicly filing such a
notice? Would such a notice filing
provide useful information to investors?
Would requiring all short sellers to keep
detailed records of their short sale
activities and filing when necessary a
notice filing relating to those activities
raise any other concerns, such as
concerns about the potential costs? In
the alternative, should we instead
require short sellers to produce books
and records upon request from the
Commission?
2. Short Sales and Short Positions
Required To Be Reported
Rule 10a–3T requires an institutional
investment manager to report short sales
and short positions, as defined in Rule
200 of Regulation SHO. Rule 200
defines a short sale to mean any sale of
a security which the seller does not own
or any sale which is consummated by
the delivery of a security borrowed by,
or for the account of, the seller.22 For
purposes of Rule 10a–3T, a short
position is the aggregate gross short
sales of an issuer’s section 13(f)
securities (excluding options), less
purchases to close out a short sale in the
same issuer. The Form SH short
position is not net of long position in
the issuer. If a person that has loaned a
security to another person sells the
security and a bona fide recall is
initiated within two business days after
trade date, the person that has loaned
the security is deemed to own the
security for purposes of Rule 200(g)(1)
and Rule 200(b) of Regulation SHO, and
such sale will not be treated as a short
sale.23 Rule 10a–3T is intended to
broadly require institutional investment
managers to account for their short
sales.
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22 17
CFR 242.200.
23 For staff guidance regarding how sales of
loaned but recalled securities should be treated for
purposes of the Emergency Orders, see the Division
of Trading and Market Guidance Regarding Sale of
Loaned but Recalled Securities available at https://
www.sec.gov/divisions/marketreg/
loanedsecuritiesfaq.htm.
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Options and short sales of options on
section 13(f) securities are not required
to be reported on Form SH. However,
certain transactions that involve options
are required to be reported.24 For
example, if an institutional investment
manager exercises a put and is net short
pursuant to Rule 200(c) of Regulation
SHO, the resulting transaction is a short
sale and must be reflected on Form SH.
Similarly, if the institutional investment
manager effects a short sale as a result
of assignment to it as a call writer, upon
exercise, the resulting transaction is a
short sale and must be reflected on
Form SH.
Request for Comment
• Rule 10a–3T is limited to reporting
on short sales and short positions of
section 13(f) securities, other than
options. Should we continue to require
disclosure about short sales of these
section 13(f) securities? Should we limit
the securities that institutional
investment managers are required to
report on to a subset of these securities,
such as equity securities of financial
institutions? Would it be more
appropriate for the Form SH reporting
requirement to cover all publicly traded
equity securities regardless of whether
they are listed on a national securities
exchange or quoted on the automated
quotation system of a registered
securities association? Should we
require reporting on Form SH for
transactions relating to any equity
security of a company reporting under
the Exchange Act?
• Rule 10a–3T requires reporting of
the start of day short position, the gross
number of securities sold short during
the day and the end of day short
position. Does requiring reporting of
this information have the effect of
reducing manipulative behavior and
other improper conduct by short sellers?
Do these categories of information
provide the most useful data for
analyzing short selling activities and
combating market manipulation? If not,
are there other benefits that Form SH
information will provide? Are there
other categories of information that we
should require that would be useful to
our objectives, such as transaction audit
trails or the portion of the number of
securities sold short in foreign markets?
• Do the definitions of the terms short
sale and short position that we use in
Rule 10a–3T adequately capture the
types of transactions on which the
Commission should focus? Should we
use definitions for the terms short sale
24 Short sales resulting from the exercise of option
contracts are reportable as of the date of the
exercise.
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61681
or short position in Rule 10a–3T that are
different from the Regulation SHO
definitions? If so, how should we define
these terms?
• How can we best address the risk
that managers may try to evade
reporting by conducting short sales
through synthetic instruments or
through third parties that are not
required to report on Form SH? Should
we require disclosure of these
transactions as well? Should we amend
the rule to require filers to report any
synthetic arrangements that function as
short sales and provide Form SH
information for those positions and
identify the parties to those
transactions? How would we define or
describe these transactions? Should we
require any short seller that is entering
the short to hedge a synthetic position
entered into with another party to
identify the other party in Form SH?
• Should we revise Rule 10a–3T to
require disclosure of options and short
sales of options? Should Rule 10a–3T
require disclosure of other financial
instruments such as single stock
futures?
• Rule 10a–3T requires information to
be reported to the Commission. Should
the rule require this information to be
provided to the self-regulatory
organizations? If so, which selfregulatory organizations should receive
this information? Should we work with
the exchanges and self-regulatory
organizations to capture this
information? Would these organizations
be well equipped to monitor the data
that we are requesting?
• Should we consider harmonizing
our short sale reporting and regulation
with foreign regulators? Would it be
appropriate to require similar short sale
reporting to that implemented by the
FSA in the United Kingdom? 25 What
aspects would be more or less
appropriate?
3. Exceptions to the Filing and
Reporting Requirements
Rule 10a–3T does not require an
institutional investment manager to file
a Form SH to report short sales and
positions if: 26
• The institutional investment
manager has not effected any short sales
of section 13(f) securities during the
reporting period covered by the Form
SH due to be filed; or
25 See information on the short selling
instruments issued in September 2008 at the
Financial Services Authority Web site at https://
www.fsa.gov.uk/pages/Library/Policy/Handbook/
short-selling.shtml.
26 Unlike the requirements under the Emergency
Orders, the rules we adopt today require short sales
or positions effected prior to September 22, 2008,
to be reported.
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• On each calendar day during the
calendar week, the start of day short
position, the gross number of securities
sold short during the day and the end
of day short position constitute less than
one-quarter of one percent of that class
of the issuer’s section 13(f) securities
issued and outstanding as reported on
the issuer’s most recent annual,
quarterly or current report filed with the
Commission pursuant to section 13 of
the Exchange Act, unless the manager
knows or has reason to believe the
information contained therein is
inaccurate and the fair market value of
the start of day short position, the gross
number of securities sold short during
the day and the end of day short
position is less than $10,000,000.27
Once a determination is made that a
Form SH filing is required, Rule 10a–3T
permits an institutional investment
manager to disclose in the appropriate
data element its reliance on this
exception with respect to information
otherwise required to be reported. The
institutional investment manager may
disclose ‘‘N/A’’ in the appropriate data
element to report the number of
securities sold short or corresponding
information regarding the short position
in that class where the data element
falls below the reporting threshold. The
exception limits the substantive
disclosure required on Form SH to
significant short sales and positions that
have the potential to materially affect
the price of the underlying securities.
This limitation is designed to strike a
balance between the burden of
compiling and providing the
information to the Commission and the
need for information about short sales to
be available to the Commission.
We are clarifying in accordance with
staff guidance provided in conjunction
with the Emergency Orders that
institutional investment managers may
act as conduits for customer orders by
handling such orders on a ‘‘riskless
principal’’ 28 basis in the following
scenarios, which may result in the
broker-dealer effecting a short sale: (i) A
broker-dealer receives an order to sell a
section 13(f) security from a customer
who is net long on the securities being
sold, and the broker-dealer then seeks to
27 For purposes of determining whether the
$10,000,000 threshold is met, the manager should
multiply the number of shares the manager sold
short that day by the market price as of the time
of the close of trading at the NYSE on that day.
28 A ‘‘riskless principal’’ transaction is generally
described as trades in which, after receiving an
order to buy (or sell) from a customer, the brokerdealer purchases (or sells) the security from (or to)
another person in a contemporaneous offsetting
transaction. See Exchange Act Rule 10b–
10(a)(2)(ii)(A) [17 CFR 240.10b–10(a)(2)(ii)(A)];
Release No. 34–33743 (Mar. 9, 1994) at n.11.
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execute that order, either in whole or in
part, by selling the section 13(f) security
as riskless principal, and the brokerdealer has an overall net short position
in such section 13(f) security; or (ii) a
broker-dealer receives an order to buy a
section 13(f) security from a customer,
and the broker-dealer then seeks to
execute that order, either in whole or in
part, by purchasing the section 13(f)
security as riskless principal, and then
selling the section 13(f) security to the
customer, and the broker-dealer has an
overall net ‘‘short’’ position in such
section 13(f) security. In both scenarios,
the short sales need not be reported by
the broker-dealer on Form SH.
We are eliminating the ‘‘grandfather’’
provision that was included in the Form
SH filing conditions set forth in the
Emergency Orders. The Emergency
Orders did not require disclosure of
existing or outstanding short positions
in section 13(f) securities held before
the September 22, 2008 effective date of
the initial order. This grandfather
provision was established primarily to
address concerns about the public
disclosure of institutional investment
managers’ pre-existing short positions
before we indicated that Form SH filings
would be made on a nonpublic basis.
One of the commenters on the
Emergency Orders noted that a
consequence of the grandfather
provision is that some Form SH filers
will have to keep two sets of books until
all of the pre-September 22 positions are
cleared out.29
Under Rule 10a–3T, Form SH filers
will be required to report all short
positions, including short positions
effected prior to September 22, 2008,
when reporting data elements 5, 6 and
7, Short Position (Start of Day), Number
of Securities Sold Short (Day) and Short
Position (End of Day) on Form SH. We
believe that the additional data about
the pre-September 22 positions will
improve our efforts to analyze short sale
activity.
In connection with elimination of the
grandfather provision, we are revising
the exception to the Form SH filing
requirements. Under the Emergency
Orders, Form SH filers are not required
to report short sales or short positions
otherwise reportable if: The short sale or
short position in the section 13(f)
security constitutes less than onequarter of one per cent of that class of
the issuer’s section 13(f) securities
issued and outstanding, as reported on
the issuer’s most recent Exchange Act
report; and the fair market value of the
29 See letter from the Securities Industry and
Financial Markets Association dated October 9,
2008 available in file No. S7–24–08.
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short sale or short position in the
section 13(f) security is less than $1
million. We are raising the threshold for
filing and reporting short sales or short
positions in a class of section13(f)
securities other than options from a fair
market value of $1 million to a fair
market value of $10 million primarily
due to the new requirement for
institutional investment managers to
report information about their preSeptember 22 short positions. In
addition, we note that the threshold is
intended to ensure that small percentage
positions that comprise large monetary
positions are reported, and we believe
that $10 million more suitably addresses
this concern.
An institutional investment manager
that is required to file a Form SH report
on October 24, 2008 or October 31, 2008
may exclude disclosure of short
positions reflecting short sales effected
before September 22, 2008 from the
Form SH report filed on either or both
of those dates. However, if the manager
excludes such disclosure, the relevant
fair market threshold for reporting short
sales or positions is the $1 million
threshold.
Request for Comment
• Is the exception in Rule 10a–3T to
Form SH reporting of short sales that
fall below the specified thresholds
appropriate? If so, are the thresholds set
at appropriate levels, or should they be
higher or lower? What threshold would
be appropriate? Should we use 5% as in
Regulation 13D 30 or is a smaller
threshold, such as 2.5%, more
appropriate? If you suggest a different
type of exception to Form SH reporting,
please describe the exception that you
think is appropriate.
• Is the reporting exception in Rule
10a–3T for ‘‘riskless principal’’
transaction appropriate? If not, why not
and what would be the best way to
address ‘‘riskless principal’’ transactions
in the rule?
• Should we continue to use a
significance test that couples a
percentage of shares outstanding
threshold with a fair market value
threshold? Should the percentage and
market value thresholds be combined or
should they be separate standards? If
separate, what level should each be set
at? Would $1 million or $10 million be
appropriate? Would 1%, 2.5% or 5% be
appropriate? Should we instead adopt a
threshold that is tied to the number of
shares sold short or some other
standard?
• As adopted, a manager is required
to report its short sales and short
30 17
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positions. However, managers often take
short positions in order to hedge the risk
on long positions in which they invest
and not for speculative purposes.
Should we develop an exemption that
would permit managers to avoid
reporting of hedging short positions or
in the alternative require additional
information that explains the purposes
of various short positions? If so, how
would we best develop the exemption
or the request for additional information
and how would we define hedging
transactions? Would such an exemption
be useful? Would it subsume the
purpose of the rule?
4. Transition and Expiration Dates of
Rule 10a–3T
As noted above, the Commission
remains concerned by sudden and
excessive fluctuation of securities prices
and disruptions in the fair and orderly
functioning of the securities markets.
We are adopting this temporary rule to
continue the reporting obligations
established in our Emergency Orders as
modified. For the reasons those Orders
were adopted and for the reasons
explained in this release, no gap
between the reporting obligations of the
Emergency Orders and the obligations
established by this rule should exist. In
addition, we received a variety of
comments from the public about the
Emergency Orders, which were valuable
in developing this interim temporary
final rule. As a result, this rule is
immediately effective.
In order to assist with the transition,
institutional investment managers that
are required to file a Form SH report on
October 24, 2008 or October 31, 2008,
must comply with Rule 10a–3T, except
that they may exclude disclosure of
short positions reflecting short sales
before September 22, 2008 from the
Form SH report filed on either or both
of those dates. An institutional
investment manager may choose to
exclude these short sales effected before
September 22 if the short position in the
section 13(f) security constitutes less
than one-quarter of one percent of that
class of the issuer’s securities issued
and outstanding as reported on the
issuer’s most recent annual or quarterly
report, and any current report
subsequent thereto, filed with the
Commission pursuant to the Exchange
Act, unless the manager knows or has
reason to believe that the information
contained therein is inaccurate, and the
fair market value of the short position in
the section 13(f) security, as of
September 22, 2008, was less than
$1,000,000. In addition, institutional
investment managers do not have to file
Form SH in XML format in accordance
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with the special filing instructions
posted on the Commission’s Web site
for their Form SH reports on October 24,
2008 or October 31, 2008. Instead, the
institutional investment manager may
file Form SH on EDGAR in the same
manner as the form was filed pursuant
to the Emergency Orders dated
September 18, 2008, September 21, 2008
and October 2, 2008.
Subsequently, beginning with the
calendar week ending November 1,
2008, institutional investment managers
are required to report as specified in
Rule 10a-3T and the filer instructions as
to the assembly of the EDGAR
submission provided on the
Commission’s Web site at https://
www.sec.gov/info/edgar/ednews/
formshsubmission.htm or in a future
update of the EDGAR Filer Manual.
Rule 10a–3T will expire and cease to be
effective on August 1, 2009 unless we
act to continue or revise the rule and
extend the effective date.
Request for Comment
• How long should institutional
investment managers be required to file
Form SH reports with the Commission?
Is the period extending until August 1,
2009 that we are adopting appropriate?
Should we require Form SH reporting
beyond August 1, 2009?
B. Form SH
1. Timing and Nonpublic Nature of
Form SH
Rule 10a–3T requires institutional
investment managers to report certain
short sales to the Commission on Form
SH. Under Rule 10a-3T, institutional
investment managers must file Form SH
on the last business day of each
calendar week following a week in
which the institutional investment
manager has effected certain short sales
with respect to any section 13(f) security
that is not an option.31
This is a change from the Form SH
filing deadline set forth in the
Emergency Orders which required Form
SH to be filed on the first business day
of each calendar week immediately
following a week in which the
institutional investment manager
effected certain short sales. This change
will provide filers with additional time
to gather, verify and file the data,
decreasing the burden on the filers
without affecting the efficacy of the
information to the staff.
As we explained in our October 2008
Order, we are concerned that publicly
31 The Form SH is required to be filed
electronically on the Commission’s EDGAR system
on or before 5:30 p.m. Eastern Time on the last
business day of the calendar week.
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available Form SH data could give rise
to additional, imitative short selling.
Accordingly Rule 10a–3T states that all
Forms SH filed with the Commission
will be nonpublic to the extent
permitted by law. The Freedom of
Information Act provides at least two
exemptions under which the
Commission has authority to withhold
the information.32 A Form SH filer
should not submit a confidential
treatment request to the Commission. A
Form SH filer must label its Form SH as
non-public, as required by the
instructions to the form.
Request for Comment
• Form SH requires detailed reports
regarding institutional investment
managers’ significant short positions in
section 13(f) securities. Are there better
ways for the Commission to gather short
selling information and address our
concerns than by using Form SH? Are
the detailed reports required on Form
SH appropriate? Is there any
information that should be required in,
or deleted from, the requirements of the
Form?
• When requiring reporting of short
positions, should we generally only
require reporting of new positions, or
should we require reporting of all short
positions? Does requiring reporting of
all short positions create significant
additional burdens on filers? If so, what
burdens and how can they best be
addressed?
• Form SH requires filers to report the
short position at the start of the day, the
aggregate number of securities sold
short on that day, and the short position
at the end of the day. Is this information
sufficient to provide an adequate
understanding of the filer’s short sale
activity during the day? Should we
require filers to report their net long and
short positions in addition to the
information already required? Is it
sufficient to simply track the net short
positions and not to report the start and
end of day positions and the aggregate
activity?
• As adopted, Form SH no longer
requires reporting of the daily value of
securities sold short, the largest intraday
short position and the time of day of
that short position. We understand that
some institutional investment managers
have had significant difficulty
32 The Freedom of Information Act (‘‘FOIA’’)
Exemption 4 provides an exemption for ‘‘trade
secrets and commercial or financial information
obtained from a person and privileged or
confidential.’’ FOIA Exemption 8 provides an
exemption for matters that are ‘‘contained in or
related to examination, operating, or condition
reports prepared by, on behalf of, or for the use of
an agency responsible for the regulation or
supervision of financial institutions.’’
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identifying the largest intraday short
position and the time of day of that
short position. This information may be
helpful in identifying manipulative
short selling. How difficult is it for filers
to track and report this information?
Should we require filers to report this
information? Is there an alternative way
to track this kind of information and
better identify when manipulative short
selling may be taking place?
• Rule 10a–3T provides that the
information required by Form SH shall
remain nonpublic to the extent
permitted by law. Institutional
investment managers have expressed
concern about making this information
public. Should the information required
by Form SH be publicly reported?
Would concerns about public reporting
be alleviated if there was a delay in
filing the information, such as a delay
of 10 days, or 45 days after the end of
a quarter in which the transaction
occurred, similar to the 45-day deadline
for Form 13F filings? Would concerns
be alleviated if the information was
reported by the institutional investment
manager on a nonpublic basis, but made
public after a delay on an issuer basis?
• If the Form SH remains nonpublic,
what is the best way to require filers to
report the Form SH information to the
Commission? Is EDGAR the best vehicle
for reporting Form SH information to
the Commission? If not, what vehicle
would be superior and why?
• We are permitting institutional
investment managers to provide the
information required by Form SH on the
last business day following a calendar
week in which the institutional
investment manager effected a short
sale. Are there concerns with permitting
institutional investment managers with
extra time to provide the information to
the Commission? Is the extra time
sufficient time to address concerns
about the need for more time to be able
to provide the information in a timely
fashion? Should we change the weekly
reporting period so it is not based on a
calendar week?
• Institutional investment managers
are required to file Form SH for any
week during which they make a
reportable short sale. Is it appropriate to
require the filing of Form SH on a
weekly basis? Should we require the
filing to be made more frequently, such
as daily? Should we require the filing
less frequently, such as bi-weekly,
monthly or quarterly, to reduce the
filing burden? Would we be able to
capture short selling information as
effectively if Form SH reports were
required to be filed less frequently?
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2. Form SH
Under the Emergency Orders, Form
SH may be filed in ASCII or HTML. We
are adopting rules that require that short
sale and position information to be filed
in XML tagged data format and
additional identification within the data
file. By requiring reporting in XML, the
Commission staff will be able to more
easily analyze the data that we receive.
Based on our experience with reporting
under the Emergency Orders, we are
reducing the data that institutional
investment managers are required to
report to the Commission by removing
the requirement that managers report
the value of securities sold short during
the day, the largest intraday short
position and the time of day of the
largest intraday short position.
We understand that some filers have
found it difficult to obtain and
burdensome to track and report the
largest intraday short position
disclosure, and the time thereof. We are
no longer requiring disclosure of the
value of securities sold short during the
day as our staff has the ability to
perform this calculation without the
disclosure from the institutional
investment manager.
There are three Form SH report types:
Form SH Entries Report, Form SH
Notice and Form SH Combination
Report. An Entries Report is filed if all
of the information that an institutional
investment manager is required to
report is included in the Form SH filing;
a Notice is filed if all of the information
that a manager is required to include in
the XML tagged data file is reported by
another Manager; a Combination Report
is filed if a portion of the manager’s
entries are filed in the manager’s report
and a portion are reported by another
manager. When filing a Form SH Notice
or Combination Report, the manager is
required to disclose the other managers
that are reporting for the manager.
Rule 10a–3T requires filers to format
the Form SH data differently than under
the Emergency Orders, but will
similarly include:
• Disclosure of the time period of the
report;
• An indication of whether the report
is an amendment;
• The name and address of the
institutional investment manager;
• A representation by the signer;
• A signature block for the person
signing the form;
• An indication of the report type;
• A list of any other managers
reporting for the manager filing the
report;
• The total number of transactions
reported;
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• A list of other managers for whom
the Form SH is filed; and
• The number of other included
managers.33
In addition, the Form SH will include,
where applicable, an XML tagged data
file that provides much of the
information that was previously
required by the Emergency Orders to be
included in the Information Table. The
XML tagged data file will provide the
information regarding short sales,
including:
• The date;
• The Central Index Key (CIK) of the
filer;
• The name of the issuer;
• The CUSIP of the issuer;
• The short position at the start of the
day;
• The number of securities sold short
on that day; and
• The short position at the end of the
day.
The XML data elements provide the
bulk of the required disclosure in Form
SH and are limited to the information
requested in the instructions to the
form. Data elements 1 through 4 provide
the date, identify the manager by CIK,
and the name and CUSIP of the issuer.
Data Elements 5 and 7 require the
manager to report the number of
securities that represent the manager’s
short position in the issuer as of the
start and end of each calendar day
during the reporting period. Data
element 6 requires the manager to report
the gross, not net, number of securities
in the issuer that the manager sold short
for each calendar day during the
reporting period.
When determining the disclosure
required in the XML tagged data file, an
institutional investment manager may
apply the exclusion in Rule 10a–
3T(b)(2)(ii) on a day-by-day and data
element-by-data element basis. For
example, if a filer has triggered a filing
obligation for a given calendar week,
has start and end of day short positions
on a particular day that do not qualify
for the reporting exception, but does not
effect any short sales on that day, the
filer would disclose the appropriate
numbers under elements 5 and 7 and
enter zero under element 6. Using the
same facts, if the filer did engage in
short sales during that particular day
but those sales in the aggregate met the
reporting exception, the filer may enter
33 Additional information the manager wishes to
report may be included on the Form SH provided
that the information does not, either by its nature,
quantity, or manner of presentation, impede the
understanding or presentation of the required
information. Only information requested by the
Form SH and its instructions is permitted in the
XML tagged data file.
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‘‘N/A’’ under element six. ‘‘N/A’’ can to
be used any time a filer has a filing
obligation and is omitting information
under the reporting exception.
To the extent still relevant,
institutional investment managers may
look to the staff guidance provided
pursuant to the Emergency Orders
regarding reporting short sales and
positions on Form SH such as the
Guidance Regarding the Commission’s
Emergency Order Concerning Disclosure
of Short Selling provided by the staff of
the Divisions of Corporation Finance,
Investment Management, and Trading
and Markets available at https://
www.sec.gov/divisions/marketreg/
shortsaledisclosurefaq.htm.
jlentini on PROD1PC65 with RULES
Request for Comment
• Is the XML tagged data file format
more easily generated than an ASCII
document in columned or delimited
format? Would XBRL tagged data be a
preferred solution? Are there any other
technology issues resulting from the use
of XML tagged data format? Do filers
have the ability to submit the XML
tagged data by November 7, 2008?
• Should delimited ASCII text data be
considered for transaction data? If the
data is to be provided to the public,
which data file format would be
preferred? If the data is to be provided
to the public, is there an advantage to
using XML because a style sheet can be
used to present XML data elements in
a readable format?
IV. Other Matters
The Administrative Procedure Act
generally requires an agency to publish
notice of a proposed rulemaking in the
Federal Register.34 This requirement
does not apply, however, if the agency
‘‘for good cause finds * * * that notice
and public procedure are impracticable,
unnecessary, or contrary to the public
interest.’’ 35 Further, the Administrative
Procedure Act also generally requires
that an agency publish an adopted rule
in the Federal Register 30 days before
it becomes effective.36 This
requirement, however, does not apply if
the agency finds good cause for making
the rule effective sooner.37 The
Commission, for good cause, finds that
notice and solicitation of comment
before Rule 10a–3T and Form SH is
impracticable, unnecessary, or contrary
to the public interest.
For the reasons we discussed
throughout this release, we believe that
we have good cause to act immediately
34 See
5 U.S.C. 553(b).
35 Id.
36 See
5 U.S.C. 553(d).
37 Id.
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to adopt this rule and form on a
temporary interim final basis. As
discussed throughout this release, we
are concerned by recent sudden and
excessive fluctuation of securities prices
and disruptions in the fair and orderly
functioning of the securities markets
and believe that the nonpublic
submission of Form SH may provide the
Commission with useful information to
combat market manipulation that
threatens investors and our capital
markets. Adopting the rules as interim
temporary rules also will minimize any
disruption in reporting by institutional
investment managers of their short sale
activities. Avoiding such disruption
should obviate the need for those
managers to stop and restart their
reporting apparatus and should allow us
uninterrupted access to the information
in the reports during a time of
significant market upheaval.
Rule 10a–3T takes effect on October
18, 2008. For the reasons discussed
above, we have acted on a temporary
interim final basis. We emphasize that
we are requesting comments on the
temporary rule and will carefully
consider any comments that we receive.
We intend to respond to the comments
in a subsequent release. Moreover, this
is a temporary rule that will expire on
August 1, 2009. Setting a termination
date for the rule will necessitate further
Commission action no later than the end
of that period if the Commission
determines to continue the same, or
similar, requirements contained in the
temporary rule. The Commission finds
that there is good cause to have Rule
10a–3T and Form SH effective as
temporary interim rules on October 18,
2008 and that notice and public
procedure in advance of effectiveness of
the rules are impracticable, unnecessary
and contrary to the public interest.38
V. Paperwork Reduction Act
A. Background
Temporary Exchange Act Rule 10a–3
relates to a ‘‘collection of information’’
requirement within the meaning of the
Paperwork Reduction Act of 1995
(PRA).39 The title for the information
collection is ‘‘Form SH’’ (OMB Control
No. 3235–0646). An agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
38 This finding also satisfies the requirements of
5 U.S.C. 808(2), allowing the rules to become
effective notwithstanding the requirement of 5
U.S.C. 801 (if a federal agency finds that notice and
public comment are ‘‘impractical, unnecessary or
contrary to the public interest,’’ a rule ‘‘shall take
effect at such time as the federal agency
promulgating the rule determines.’’).
39 44 U.S.C. 3501 et seq.
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information unless it displays a current
valid control number.
The Office of Management and Budget
(‘‘OMB’’) approved Form SH on
September 19, 2008 in connection with
the Commission’s issuance of the
Emergency Order to require institutional
investment managers to file Form SH
with the Commission.40 We submitted
revised burden estimates to OMB for
review and approval in accordance with
44 U.S.C. 3507(j) and 5 CFR 1320.13.
Separately, we submitted the revised
burden estimates to OMB for review and
approval in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. OMB has
approved the revised Form SH burden
estimates related to our adoption of Rule
10a–3T on an emergency basis.
B. Summary of Rule 10a–3T and Form
SH Burden Estimates
Rule 10a–3T will require certain
institutional investment managers that
exercise investment discretion with
respect to accounts holding section 13(f)
securities that have an aggregate fair
market value of at least $100,000,000 to
file Form SH on a weekly basis during
the period covered by this interim rule.
The Form SH filing must be made on
the last business day of each calendar
week following a week in which the
institutional investment manager has
effected any short sale with respect to
any section 13(f) security that is not an
option. Form SH is filed on a nonpublic
basis and compliance is mandatory.
With respect to each applicable
section 13(f) security, the Form SH
filing must reflect the number of
securities sold short during the day, as
well as the start of day short position
and end of day short position, for that
security on each calendar day of the
prior week in which the institutional
investment manager engaged in trading
activity with respect to short sales. No
Form SH filing is required when no
short sales of a section 13(f) security
have been effected during the reporting
period to be covered by the Form SH
filing or where all short sales and short
positions are below the following
thresholds on each day of the calendar
week to be covered by the report:
• The short sales and short positions
in the section 13(f) security constitute
less than one-quarter of one-percent of
that class of the issuer’s section 13(f)
securities issued and outstanding as
reported on the issuer’s most recent
annual or quarterly report, and any
current report subsequent thereto, filed
with the Commission pursuant to the
Exchange Act, unless the manager
knows or has reason to believe that the
40 Release
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information contained therein is
inaccurate; and
• The fair value market of the short
sale and short position in the section
13(f) security is less than $10,000,000.
When we originally requested
approval of Form SH in connection with
the Emergency Orders, we estimated
that the same number of respondents
that file Form 13F also would file Form
SH, and that each Form SH filing would
impose an estimated five burden hours
on each respondent. Some Form SH
filers indicated that the five hour
burden estimate is too low, so we are
increasing it to 20 hours as explained
below. We also now have actual data
from the Form SH filings that we
received on September 29, 2008,
October 6, 2008 and October 14, 2008
upon which to base our revised burden
estimates. We estimate that we will
receive approximately 1,000 Form SH
filings from institutional investment
managers each week during the ninemonth period during which Rule 10a–
3T will be in effect.
Pursuant to Rule 10–3T, Form SH
contains three fewer data elements than
did the version of Form SH required by
the Emergency Orders. Therefore, we
estimate that 1,000 institutional
investment managers will file 36 Form
SH reports annually at an estimated 20
hours per filing for a total annual
reporting burden of 720,000 hours.41
The 20 hour per filing estimate is based
on data received from a small sample of
actual filers and a random sample of
filings conducted by our Office of
Economic Analysis. Staff in the Office of
Economic Analysis sampled 100 of the
Form SH filings that we received on
October 6, 2008. The average number of
pages filed was 8.2 and the median
number of pages filed was 6, while the
maximum number of pages included in
a sample filing was 228 and the
minimum was 1 page.
Based on limited data from a small
sample of actual filers, we estimate that
the legal costs of filing Form SH for
investment managers that retain an
outside law firm to be approximately
$1,000 per filing for 36 filings for a total
of $36,000.42 We further estimate the
filing agent costs to be $1,500 per week
for managers that retain an outside agent
to assist them in filing Form SH on
EDGAR for a total of $54,000 ($1,500 ×
36), and a combined cost total of
41 This estimate conservatively assumes that each
Form SH filer will make a Form SH filing each
week during the period covered by Rule 10a–3T.
42 The $1,000 per filing estimate is based on twoand-a-half hours of outside law firm time at a rate
of $400 per hour.
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$90,000,000 ($90,000 per filer × 1000
filers).
We understand that many
institutional investment managers
incurred a much higher reporting
burden than five hours per filing in
connection with the Form SH reports
that they filed to comply with the
Emergency Orders. A substantial
portion of the initial reporting burden,
as discussed in more detail in the CostBenefit Analysis, was attributable to the
compressed timeframe in which the
managers had to comply with the newly
created form and the need for new
programs to combine data from two
different types of automated information
systems to satisfy the Form SH
disclosure requirements. The revised 20
hour estimate and cost estimate reflects
an estimated average reporting burden
associated with Form SH for each of the
36 filings that some institutional
investment managers must make during
the nine month period covered by Rule
10a–3T.
C. Solicitation of Comments
Pursuant to 44 U.S.C. 3506(c)(2)(B),
we request comments to: (1) Evaluate
whether Form SH is necessary for the
proper performance of the functions of
the agency, including whether it will
have practical utility; (2) evaluate the
accuracy of our estimate of the burden
imposed by Form SH; (3) determine
whether there are ways to enhance the
quality, utility and clarity of the
information to be collected; and (4)
evaluate whether there are ways to
minimize the burden of the collection of
information on those who are to
respond, including through the use of
automated collection techniques or
other forms of information technology.
Persons submitting comments on the
collection of information requirements
should direct the comments to the
Office of Management and Budget,
Attention: Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Washington, DC 20503, and
should send a copy to Florence E.
Harmon, Acting Secretary, Securities
and Exchange Commission, 100 F
Street, NE., Washington, DC 20549–
1090, with reference to File No. S7–31–
08. Requests for materials submitted to
OMB by the Commission with regard to
these collections of information should
be in writing, refer to File No. S7–31
–08, and be submitted to the Securities
and Exchange Commission, Records
Management, Office of Filings and
Information Services, 100 F Street, NE.,
Washington, DC 20549.
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VI. Cost-Benefit Analysis
A. Background
As stated in the Emergency Orders,
we are concerned about the potential for
sudden and excessive fluctuations of
securities prices and disruption in the
functioning of the securities markets
that could threaten fair and orderly
markets. In particular, we are concerned
that some persons may manipulate the
stock of issuers that have become
temporarily weakened by current
market conditions. Possible unnecessary
or artificial downward price movements
may be based on unfounded rumors and
may be exacerbated by short selling.
Such price declines can give rise to
questions about the underlying financial
condition of an issuer, which in turn
can create a crisis of confidence that is
not warranted by the issuer’s true
financial condition. This undue crisis of
confidence can threaten an issuer’s
viability as a going concern, even when
the underlying fundamentals of the firm
do not suggest cause.
For example, financial institutions
with demand deposit liabilities might
experience unwarranted depositor
withdrawals that, without replacement,
could lead to a funding shortfall for the
financial institution’s long term assets,
such as residential mortgages and
commercial loans. Liquidation of these
assets to meet depositor redemption
could force sales at unfavorable prices
that erode capital and increase the risk
of insolvency and institutional failure.
Non-financial institutions can face
similar risks from an undue crisis in
confidence. Manufacturers that rely on
credit with suppliers or financial
institutions for production inputs might
see this credit offered at less favorable
terms, or even worse, become
unavailable, placing undue burden on
their working capital and cash reserves.
An undue crisis in confidence also
could lead customers to choose
alternative products or producers if
customers fear that future commitments,
such as warrantees or service
agreements, might not be honored.
We therefore believe that it is
necessary to continue requiring
institutional investment managers
subject to the Form 13F filing
requirements to report information
concerning their short sales of Rule 13(f)
securities on Form SH after the
expiration of the Emergency Order
dated October 2, 2008 on October 17,
2008. New Exchange Act Rule 10a–3T
requires an institutional investment
manager that exercises investment
discretion with respect to accounts
holding section 13(f) securities having
an aggregate fair market value of at least
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$100 million to file Form SH with the
Commission each calendar week
immediately following a calendar week
in which the manager effects a short sale
of section 13(f) securities, other than
options, exceeding stated thresholds.
Rule 10a–3T and Form SH are
temporary requirements that will expire
on August 1, 2009.
B. Benefits
The securities markets have
undergone significant stress in recent
months. An expected benefit of Rule
10a–3T and Form SH is to help restore
investor confidence in the markets. The
disclosure may help to combat
manipulative behavior by making it
easier for us to analyze short selling
activity. To the extent that the rule does
reduce manipulative behavior while
still permitting legitimate trading
activity should help to alleviate any
undue crisis of investor confidence and
may strengthen the market’s ability to
correctly incorporate accurate
information into securities prices.
Among other things, the Form SH
disclosure will enable staff in our Office
of Economic Analysis and Office of
Compliance, Inspections and
Examinations to analyze short selling
patterns and use the data along with
other information to study the impact of
short selling on the market in times of
financial crisis. For example, the Form
SH disclosure can help Commission
staff evaluate the effectiveness of some
of our other emergency initiatives
relating to short selling, such as our new
temporary Rule 204T requiring short
sellers and their broker-dealers to
deliver securities by the settlement date
(three days after the sale transaction
date, or T+3).
In response to feedback on the
Emergency Orders, we have further
tailored the information collected. We
believe that this will limit the expense
of complying with the disclosure, while
still providing us with the information
that we need.
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C. Costs
Rule 10a–3T will impose costs on
institutional investment managers
subject to the Form SH filing
requirement. We estimate that
approximately 1,000 Form SH reports
will be filed with the Commission each
week during the period through August
1, 2009, and that each filing will impose
an estimated reporting burden of 20
hours on the filer at an estimated
internal cost of $3,500 per filing,43 plus
43 Consistent
with recent rulemaking estimates,
we used a $175 per hour rate to estimate the cost
of work performed internally at the company.
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an estimated $90,000 per filing in legal
and filing costs for managers that retain
the services of an outside law firm and
EDGAR filing agent.44
In addition to the costs associated
with the reporting burden, we
understand that many institutional
investment managers spent a substantial
number of hours creating a reporting
mechanism to capture the data required
by Form SH when they first became
subject to the reporting requirement
under the Emergency Orders. The
managers typically maintain an
automated system to generate
information about their short positions,
and a different automated system to
generate information about their trading
activity. Due to the fact that Form SH
requires information about the
manager’s short positions, as well as the
number of securities sold short during
the day, they had to create new
programs to generate the necessary data.
The temporary rule will also be
associated with implementation costs.
By requiring filings in XML, filers will
need to reprogram systems to be
prepared to file in XML by November 7.
In addition, changing the form to report
fewer data items will also involved
reprogramming costs. We believe that
these extra costs are justified because
the changes help to limit the costs and
improve the ability of the Commission
to use the information in the filings.
We recognize that the Form SH
reporting requirement imposed by Rule
10a–3T may result in increased short
selling costs for participants that may
impact legitimate short selling activities.
We sought to limit the potential costs
associated with Form SH filing under
Rule 10a–3T by:
• Imposing the Form SH filing
obligation only on institutional
investment managers that exercise
discretion over accounts holding section
13(f) securities having an aggregate fair
market value of at least $100 million—
these managers have experience with
SEC filing and tend to be larger and
better able to bear the cost;
• Requiring reporting only about
section 13(f) securities, but not
including options or equity securities of
all public companies—the section 13(f)
category of securities is a well-defined,
pre-existing category of securities that
institutional investment managers use
in connection with their Form 13F filing
obligations;
• Not requiring Form SH to be filed
following a week in which the
44 We do not expect that all Form SH filers will
retain the services of an outside law firm or filing
agent to assist them, but we conservatively assume
that they will for purposes of these cost estimates.
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61687
institutional investment manager did
not effect any short sale of a section
13(f) security, even if the manager closes
a short position during that week;
• Allowing aggregation of reporting
on Form SH across multiple
institutional investment managers;
• Establishing thresholds below
which short sales need not be reported
on Form SH; and
• Establishing a last business day of
each calendar week reporting deadline,
which should help to reduce weekend
labor and systems time.
We request comments on this CostBenefit Analysis and any of the costs
and benefits associated with Rule 10a–
3T and Form SH. We solicit quantitative
data to assist with our assessment of the
costs and benefits of the rule and form.
• Have we accurately estimated the
costs?
• Are additional costs involved in
complying with the rule? What are the
types, and amounts, of the costs?
• Can the rule be modified to mitigate
costs?
• Do the benefits justify the costs?
• Will the Form SH reporting
requirements influence the day-to-day
decisions made by institutional
investment managers in any substantive
way? For example, will managers
choose in some cases to avoid short
selling, or to short through alternative
vehicles such as OTC derivatives to
avoid reporting?
• Given that Rule 10a–3T requires
reporting of short sales and short
positions, but does not require Form SH
filers to report whether the short sales
are being used to hedge other positions,
does the Form SH information provide
an accurate picture of the short selling
activities of institutional investment
managers and their clients? Is there an
alternative reporting requirement that
would more accurately reflect managers’
true activities?
• Rule 10a–3T requires a single form
that aggregates short positions across
multiple systems and across portfolios
managed for multiple customers. Does
the aggregation process pose any special
difficulties or impose additional costs
beyond those that would be incurred if
filers could submit separate reports for
separate units or systems?
• How costly will it be for Form SH
filers to develop the code needed to file
Form SH in XML format? Are there less
costly alternatives that will present the
Form SH data in a machine readable
format?
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VII. Consideration of Burden of
Competition and Promotion of
Efficiency, Competition and Capital
Formation
Section 23(a)(2) of the Exchange
Act 45 requires us, when adopting rules
under the Exchange Act, to consider the
impact that any new rule would have on
competition. In addition, section
23(a)(2) prohibits us from adopting any
rule that would impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Exchange Act. Section
3(f) of the Exchange Act 46 and section
2(c) of the Investment Company Act of
1940 47 require us, when engaging in
rulemaking to consider or determine
whether an action is necessary or
appropriate in the public interest, to
consider, in addition to the protection of
investors, whether the action will
promote efficiency, competition, and
capital formation.
We believe that Rule 10–a3T will not
have an adverse impact on competition
among the institutional investment
managers required to file Form SH and
other parties effecting short sales
because the Commission will keep Form
SH information nonpublic to the extent
permitted by law. We have received
comments indicating that the
information required by Form SH is
highly proprietary and could be used to
try and reverse engineer an institutional
investment manager’s trading strategy.48
In addition, there is a concern that
public disclosure could inaccurately
suggest that the managers effecting short
sales have a negative view of some
issuers’ prospects given that short sales
may be a part of some managers’ routine
hedging strategies.49
Further, the rule imposes similar costs
on institutional investment managers of
similar size, given that only larger
institutional investment managers
subject to the Form 13F filing
requirement are subject to the Form SH
filing requirement. Therefore, it does
not create any competitive
disadvantages among these managers.
Rule 10a–3T could, however, create an
advantage for smaller institutional
investment managers that are not
subject to the Form SH filing
requirement as compared to the larger
filers. We believe any burden on
competition imposed by the rule is
necessary or appropriate in furtherance
of the purposes of the Exchange Act
45 15
U.S.C. 78w(a)(2).
46 15 U.S.C. 78c(f).
47 15 U.S.C. 80a–2(c).
48 See, for example, letter from WilmerHale dated
October 10, 2008 available in file No. S7–24–08.
49 Id.
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17:16 Oct 16, 2008
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because the rule will assist us in
addressing concerns that short selling
may be used to manipulate the stock of
issuers.
To the extent Rule 10a–3T achieves
its objective of combating market
manipulation, the rule should promote
efficiency and capital formation by
increasing investor confidence and
strengthening the market’s ability to
correctly incorporate accurate
information into securities prices. We
request comment on these matters in
connection with the rule.
VIII. Regulatory Flexibility
Certification
Section 3(a) of the Regulatory
Flexibility Act requires the Commission
to undertake a Regulatory Flexibility
Analysis of the effect of its rules on
small entities unless the Commission
certifies that the rules do not have a
significant economic impact on a
substantial number of small entities.50
Pursuant to Section 605(b) of the
Regulatory Flexibility Act, the
Commission hereby certifies that
Exchange Act Rule 10a–3T and Form
SH do not have a significant impact on
a substantial number of small entities.51
A ‘‘small entity’’ is defined under Rule
0–7 of the Investment Advisers Act of
1940 for purposes of the Regulatory
Flexibility Act as an investment adviser
that:
• Has assets under management and
reported in its annual updating
amendment to Form ADV of less than
$25 million;
• Did not have total assets of $5
million or more on the last day of its
most recent fiscal year; and
• Does not control, is not controlled
by, and is not under common control
with another investment adviser that
has assets under management of $25
million or more, or any person (other
than a natural person) that had total
assets of $5 million or more on the last
day of the most recent fiscal year.
Rule 10a–3T requires only an
institutional investment manager that
exercises investment discretion over
investment accounts holding section
13(f) securities having an aggregate fair
market value of at least $100 million on
the last trading day of a month that is
relevant to the period covered by the
rule to file Form SH with the
Commission. Therefore, we do not
50 5
U.S.C. 603(a).
the requirements of the Regulatory
Flexibility Act do not apply to rules adopted under
the Administrative Procedure Act’s ‘‘good cause’’
exception, see 5 U.S.C. 601(2) (defining ‘‘rule’’ and
notice requirements under the Administrative
Procedure Act), we have nevertheless provided this
certification.
51 Although
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expect the rule to affect a significant
number of small entities under the
definition of ‘‘small entity’’ set forth
above. Not all of the institutional
investment managers that may be
required to file Form SH are registered
as investment advisers under the
Investment Advisers Act. Despite the
fact that the Rule 0–7 definition of a
small entity is designed for purposes of
the Investment Advisers Act, it also
provides a useful basis for determining
whether unregistered investment
advisers are small entities.
We solicit comment on the
certification. Commenters are asked to
describe the nature of any impact on
small entities and provide any empirical
data.
IX. Statutory Basis and Text of
Amendments
We are adopting amendments to rules
pursuant to sections 3(b), 10 and 23(a)
of the Exchange Act, as amended.
List of Subjects in 17 CFR Parts 240 and
249
Reporting and recordkeeping
requirements, Securities.
In accordance with the foregoing, the
Securities and Exchange Commission is
amending Title 17, chapter II of the
Code of Federal Regulations as follows:
■
PART 240—GENERAL RULES AND
REGULATIONS, SECURITIES
EXCHANGE ACT OF 1934
1. The authority citation for part 240
continues to read, in part, as follows:
■
Authority: 15 U.S.C. 77c, 77d, 77g, 77j,
77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn,
77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j,
78j–1, 78k, 78k–1, 78l, 78m, 78n, 78o, 78p,
78q, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–
20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4,
80b–11, and 7201 et seq.; and 18 U.S.C. 1350,
unless otherwise noted.
*
*
*
*
*
2. Section 240.10a–3T is added to
read as follows:
■
§ 240.10a–3T Temporary Rule for reporting
short sales by institutional investment
managers.
(a)(1) For purposes of this section, the
terms ‘‘investment discretion’’ and
‘‘section 13(f) securities’’ shall have the
meanings set forth in § 240.13f–1(b) and
§ 240.13f–1(c), respectively.
(2) For purposes of this section, the
term ‘‘short sale’’ shall have the
meaning set forth in § 242.200(a) of this
chapter, and, for purposes of Form SH
a ‘‘short position’’ is the aggregate gross
short sales of an issuer’s section 13(f)
securities (excluding options), less
purchases to close out a short sale in the
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same issuer. The Form SH short
position is not net of long position in
the issuer. If a person that has loaned a
security to another person sells the
security and a bona fide recall is
initiated within two business days after
trade date, the person that has loaned
the security is deemed to own the
security for purposes of Rule 200(g)(1)
and Rule 200(b) of Regulation SHO, and
such sale will not be treated as a short
sale.
(b)(1) Every institutional investment
manager that exercises investment
discretion with respect to accounts
holding section 13(f) securities that has
filed, or was required to file, a Form 13F
(§ 249.325 of this chapter) for the
calendar quarter, as required under
Section 13(f) of the Act (15 U.S.C.
78m(f)) and § 240.13f–1(a) thereunder,
shall file a report on Form SH
(§ 249.326T of this chapter) with the
Commission on the last business day of
each calendar week immediately
following a calendar week in which the
institutional investment manager has
effected a reportable short sale with
respect to a section 13(f) security that is
not an option.
(2) An institutional investment
manager is not required to file Form SH
to report short sales or short positions
of section 13(f) securities on Form SH
where:
(i) No short sales of a section 13(f)
security have been effected during the
reporting period to be covered by the
Form SH filing; or
(ii) On each calendar day during the
calendar week, the start of day short
position, the gross number of securities
sold short during the day and the end
of day short position each constitute
less than one-quarter of one percent of
that class of the issuer’s section 13(f)
securities issued and outstanding as
reported on the issuer’s most recent
annual, quarterly or current report filed
with the Commission pursuant to
section 13 of the Exchange Act, unless
the manager knows or has reason to
believe the information contained
therein is inaccurate, and the fair market
value of the start of day short position,
the gross number of securities sold short
during the day and the end of day short
position each are less than $10,000,000.
(3) Once a determination is made that
a Form SH filing is required, an
institutional investment manager is not
required to report short sales or short
positions of section 13(f) securities on
Form SH where:
(i) On any calendar day of the
calendar week, the start of day short
position, the gross number of securities
sold short during the day, or the end of
day short position in the section 13(f)
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security constitutes less than onequarter of one percent of that class of
the issuer’s section 13(f) securities
issued and outstanding as reported on
the issuer’s most recent annual,
quarterly or current report filed with the
Commission pursuant to section 13 of
the Exchange Act, unless the manager
knows or has reason to believe the
information contained therein is
inaccurate, and the fair market value of
the start of day short position, the gross
number of securities sold short during
the day, or the end of day short position
is less than $10,000,000. The
institutional investment manager must
designate in the appropriate data
element its reliance on this exception
with respect to information otherwise
required to be reported; or
(ii) A broker-dealer seeks to execute a
customer order, either in whole or in
part, through a riskless principal
transaction, and a short sale results from
a sale order of a customer who is net
long the section 13(f) security, or a
purchase order of a section 13(f)
security.
(4) The Form SH shall be nonpublic
to the extent permitted by law.
(c) A report on Form SH shall identify
the date of the transaction, the
institutional investment manager by
EDGAR Central Index Key, the issuer
name and CUSIP for the relevant
securities and reflect the start of day
short position, the gross number of
securities sold short during the day, and
the end of day short position, on each
day of the calendar week in which short
sale trading activity occurred.
(d) This section will expire on August
1, 2009.
PART 249—FORMS, SECURITIES
EXCHANGE ACT OF 1934
3. The authority citation for Part 249
continues to read in part as follows:
■
Authority: 15 U.S.C. 78a et seq. and 7201
et seq.; and 18 U.S.C. 1350, unless otherwise
noted.
*
*
*
*
*
4. Add § 249.326T and Temporary
Form SH to read as follows:
■
§ 249.326T Form SH, weekly report of
short sales and positions.
(a) This form shall be used by
institutional investment managers to file
weekly reports pursuant to § 240.10a–3T
of this chapter. A weekly report on this
form pursuant to § 240.10a–3T of this
chapter shall be filed on the last
business day of each calendar week
immediately following a calendar week
in which the institutional investment
manager effected a short sale and shall
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61689
be nonpublic to the extent permitted by
law.
(b) The temporary section will expire
on August 1, 2009.
Note: The text of Form SH does not, and
this amendment will not, appear in the Code
of Federal Regulations.
OMB APPROVAL
OMB Number: 3235–0646
Expires: April 30, 2009
Estimated average burden hours per response: 20.0
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Form SH
Weekly Report of Short Sales and Short
Positions
General Instructions
1. Rule as to Use of Temporary Form SH
(‘‘Form SH’’). Institutional investment
managers (‘‘Managers’’) that exercise
investment discretion with respect to
accounts holding section 13(f) securities, as
defined in rule 13f–1(c) under the Securities
Exchange Act of 1934 [15 U.S.C. 78m(f)]
(‘‘Exchange Act’’), who have filed or were
required to file a Form 13F for the previous
calendar quarter, must file a nonpublic report
on Form SH with the Commission to report
certain information about short sales and
short positions. The nonpublic Form SH
filing must be made on the last business day
of each calendar week immediately following
a Form SH reporting period (i.e., the
preceding Sunday-Saturday calendar week)
in which the Manager entered into any new
short positions with respect to any section
13(f) securities except for any short positions
for options (‘‘SH Short Positions’’). The
nonpublic Form SH will report SH Short
Positions for the Sunday-Saturday calendar
week that precedes the date on which the
Form SH is due to be filed.
2. Rules to Prevent Duplicative Reporting.
If two or more Managers that are required to
file a report on Form SH for the reporting
period exercise investment discretion with
respect to the same securities, only one such
Manager must include information in its
reports on Form SH. A Manager whose
information is reported on Form SH by
another Manager (or Managers), must identify
the Manager(s) reporting on its behalf.
3. Filing of Form SH. A Form SH report
that is filed by a Manager with the
Commission shall be nonpublic to the extent
permitted by law. A Manager must label its
Form SH as non-public by adding the phrase
NONPUBLIC (in bold and capital letters) at
the top and bottom of each page of the form
with the exception of the XML tagged data
file containing transaction data. A Manager
must file a Form SH report with the
Commission on the last business day of each
calendar week immediately following the
preceding calendar week period (Sunday—
Saturday) in which the Manager has entered
into any new SH Short Position(s) in
accordance with Rule 232.13 of Regulation
S–T [17 CFR 232.13]. The Form SH must be
E:\FR\FM\17OCR1.SGM
17OCR1
61690
Federal Register / Vol. 73, No. 202 / Friday, October 17, 2008 / Rules and Regulations
filed electronically using the Commission’s
EDGAR system.
4. Official List of Section 13(f) Securities.
The Official List of Section 13(f) Securities
published by the Commission (the ‘‘13F
List’’) lists the securities the holdings of
which a Manager is to report on Form 13F.
See rule 13f–1(c) [17 CFR 240.13f–1(c)]. Form
SH filers may rely on the current 13F List in
determining whether they need to report on
Form SH information about any particular
equity security, excluding short positions for
options that are on the 13F List. The 13F List
is available on the SEC’s Web site, at https://
www.sec.gov/divisions/investment/
13flists.htm. Paper copies are available at a
reasonable fee from the Securities and
Exchange Commission, Public Reference
Room, 100 F Street, NE., Washington, DC
20549–1520.
Paperwork Reduction Act Information
The Office of Management and Budget has
approved this collection of information
pursuant to 44 U.S.C. 3507 and 5 CFR
1320.13. The OMB control number for this
collection of information is 3235–0646. An
agency may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless it displays a
currently valid control number. We estimate
that providing the requested information will
take, on average, approximately 20 hours.
Any member of the public may direct to the
Commission any comments concerning the
accuracy of this burden estimate and any
suggestions for reducing this burden.
Filings with the form types set forth in this
instruction will be filed on a nonpublic basis.
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, DC 20549
TEMPORARY FORM SH
WEEKLY REPORT OF SHORT SALES AND
SHORT POSITIONS
Report for the Period Ended: [Month, Day,
Year] llllllllllllllllll
Check here if Amendment [ ]; Amendment
Number: llllllllllllllll
This Amendment (Check only one):
[ ] is a restatement.
[ ] adds new entries.
Institutional Investment Manager Filing
this Report:
Name: lllllllllllllllll
Address: llllllllllllllll
lllllllllllllllllllll
lllllllllllllllllllll
Form 13F File Number: 28– llllllll
Central Index Key (CIK) Number: lllll
The institutional investment manager filing
this report and the person by whom it is
signed hereby represent that the person
signing the report is authorized to submit it,
that all information contained herein is true,
correct and complete, and that it is
understood that all required items,
statements, schedules, lists, and tables, are
considered integral parts of this form.
Person Signing this Report on Behalf of
Reporting Manager:
Name: lllllllllllllllll
Title: llllllllllllllllll
Phone: lllllllllllllllll
Signature, Place, and Date of Signing
lllllllllllllllllllll
[Signature]
lllllllllllllllllllll
[City, State]
lllllllllllllllllllll
[Date]
Report Type (Check only one):
[ ] FORM SH ENTRIES REPORT. (Check
here if all entries of this reporting manager
are reported in this report.)
[ ] FORM SH NOTICE. (Check here if no
entries reported are in this report, and all
entries are reported by other reporting
manager(s).)
[ ] FORM SH COMBINATION REPORT.
(Check here if a portion of the entries for this
reporting manager is reported in this report
and a portion is reported by other reporting
manager(s).)
List of Other Managers Reporting for this
Manager:
Provide a list of the name(s), Form 13F file
number(s) and CIK numbers of all
institutional investment managers who are
reporting for this manager.
[If there are no entries in this list, state
‘‘NONE’’.]
Number of Other Included Managers: lll
Total Number of Transactions Reported:
lllllllllllllllllllll
List of Other Included Managers:
Provide a numbered list of the name(s),
Form 13F file number(s) and CIK numbers of
all institutional investment managers with
respect to which this Form SH report is filed,
other than the manager filing this report.
[If there are no entries in this list, state
‘‘NONE’’.]
INFORMATION TABLE
Element 1
Element 2
Element 3
Element 4
Date .......................
CIK of Manager ...
Name of Issuer ...
CUSIP .................
*
*
*
*
*
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–24895 Filed 10–16–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 241 and 242
[Release No. 34–58775; File No. S7–19–07]
jlentini on PROD1PC65 with RULES
RIN 3235–AJ57
Amendments to Regulation SHO
Securities and Exchange
Commission.
ACTION: Final rule.
AGENCY:
VerDate Aug<31>2005
17:16 Oct 16, 2008
Jkt 217001
Element 5
Short Position
(Start of Day).
SUMMARY: The Securities and Exchange
Commission (‘‘Commission’’) is
adopting amendments to Regulation
SHO under the Securities Exchange Act
of 1934 (‘‘Exchange Act’’). The
amendments are intended to further
reduce the number of persistent fails to
deliver in certain equity securities by
eliminating the options market maker
exception to the close-out requirement
of Regulation SHO. As a result of the
amendments, fails to deliver in
threshold securities that result from
hedging activities by options market
makers will no longer be excepted from
Regulation SHO’s close-out
requirement. The Commission is also
providing guidance regarding bona fide
market making activities for purposes of
the market maker exception to
Regulation SHO’s locate requirement.
PO 00000
Frm 00034
Fmt 4700
Sfmt 4700
Element 6
Number of Securities Sold Short
(Day).
DATES:
Element 7
Short Position
(End of Day).
Effective Date: October 17, 2008.
FOR FURTHER INFORMATION CONTACT:
James A. Brigagliano, Associate
Director, Josephine J. Tao, Assistant
Director, Victoria L. Crane, Branch
Chief, Joan M. Collopy, Special Counsel,
Christina M. Adams and Matthew
Sparkes, Staff Attorneys, Office of
Trading Practices and Processing,
Division of Trading and Markets, at
(202) 551–5720, at the Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–6628.
SUPPLEMENTARY INFORMATION: The
Commission is amending Rule 203 of
Regulation SHO [17 CFR 242.203] under
the Exchange Act.
I. Introduction
To further Regulation SHO’s goal of
reducing fails to deliver in equity
E:\FR\FM\17OCR1.SGM
17OCR1
Agencies
[Federal Register Volume 73, Number 202 (Friday, October 17, 2008)]
[Rules and Regulations]
[Pages 61678-61690]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-24895]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 240 and 249
[Release No. 34-58785; File No. S7-31-08; October 15, 2008]
RIN 3235-AK23
Disclosure of Short Sales and Short Positions by Institutional
Investment Managers
AGENCY: Securities and Exchange Commission.
ACTION: Interim final temporary rule; Request for comments.
-----------------------------------------------------------------------
SUMMARY: The Commission is adopting an interim final temporary rule
requiring certain institutional investment managers to file information
on Form SH concerning their short sales and positions of section 13(f)
securities, other than options. The new rule extends the reporting
requirements established by our Emergency Orders dated September 18,
2008, September 21, 2008 and October 2, 2008, with some modifications.
The extension will be effective until August 1, 2009. Consistent with
the Orders, the rule requires an institutional investment manager that
exercises investment discretion with respect to accounts holding
section 13(f) securities having an aggregate fair market value of at
least $100 million to file Form SH with the Commission following a
calendar week in which it effected a short sale in a section 13(f)
security, with some exceptions.
DATES: Effective Date: Sec. Sec. 240.10a-3T, 249.326T and temporary
Form SH are effective from October 18, 2008 until August 1, 2009.
Compliance Dates: An institutional investment manager that is
required to file a Form SH report on October 24, 2008 or October 31,
2008, must comply with Rule 10a-3T, except that it:
May exclude disclosure of short positions reflecting short
sales before September 22, 2008 from the Form SH report filed on either
or both of those dates. An institutional investment manager choosing to
exclude these short sales effected before September 22 is not required
to report short positions otherwise reportable if the short position in
the section 13(f) security constitutes less than one-quarter of one
percent of that class of the issuer's securities issued and outstanding
as reported on the issuer's most recent annual or quarterly report, and
any current report subsequent thereto, filed with the Commission
pursuant to the Securities Exchange Act of 1934, unless the manager
knows or has reason to believe that the information contained therein
is inaccurate, and the fair market value of the short position in the
section 13(f) security is less than $1,000,000; and
Does not have to file Form SH in XML format in accordance
with the special filing instructions posted on the Commission's Web
site. Instead, the institutional investment manager may file Form SH on
EDGAR in the same manner as the form was filed pursuant to the
Emergency Orders dated September 18, 2008, September 21, 2008 and
October 2, 2008.
Comment Date: Comments on the interim final temporary rule should
be received on or before December 16, 2008.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/final.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number S7-31-08 on the subject line; or
Use the Federal Rulemaking Portal (https://
www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments in triplicate to Florence E. Harmon,
Acting Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-31-08. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's
Internet Web site (https://www.sec.gov/rules/final.shtml). Comments are
also available for public inspection and copying in the Commission's
Public Reference Room, 100 F Street, NE., Washington, DC 20549. All
comments received will be posted without change; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make publicly available.
FOR FURTHER INFORMATION CONTACT: Steven Hearne, at (202) 551-3430, in
the Division of Corporation Finance, Marlon Paz, at (202) 551-5756, in
the Division of Trading and Markets, or Stephan N. Packs, at (202) 551-
6865, in the Division of Investment Management, U.S. Securities and
Exchange Commission, 100 F Street, NE., Washington, DC 20549-3010.
SUPPLEMENTARY INFORMATION: The Commission is adopting temporary Rule
10a-3T and Temporary Form SH (Form SH) under the Securities Exchange
Act of 1934 \1\ as an interim temporary final rule. We are soliciting
comments on all aspects of the interim temporary final rule and Form
SH. We will carefully consider the comments that we receive and intend
to address them in a subsequent release.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78 et seq.
---------------------------------------------------------------------------
I. Background
Recently, we have become concerned that there is a substantial
threat of sudden and excessive fluctuations of securities prices and
disruption in the functioning of the securities markets that could
threaten fair and orderly markets. These concerns are evidenced by our
recent publication of Emergency Orders under section 12(k) of the
Exchange Act in July \2\ and September of this year.\3\ In these
Orders, we noted our concerns about the possible unnecessary or
artificial price movements that may be based on unfounded rumors and
may be exacerbated by short selling.
---------------------------------------------------------------------------
\2\ Release No. 34-58166 (July 15, 2008) [73 FR 42379] (imposing
borrowing and delivery requirements on short sales of the equity
securities of certain financial institutions).
\3\ Release Nos. 34-58592 (Sept. 18, 2008) [73 FR 55169]
(temporarily prohibiting short selling in the publicly traded
securities of certain financial institutions), 34-58591 (Sept. 18,
2008) [73 FR 55175] (requiring institutional investment managers to
report short sales activities) and 34-58572 (Sept. 17, 2008) [73 FR
54875] (imposing enhanced delivery requirements on sales of all
equity securities).
---------------------------------------------------------------------------
Short selling involves a sale of a security that the seller does
not own or a sale which is consummated by the delivery of a security
borrowed by, or for the account of, the seller.\4\ Short sales normally
are settled by the
[[Page 61679]]
delivery of a security borrowed by or on behalf of the seller.
Regulation SHO, which became fully effective on January 3, 2005, sets
forth the regulatory framework governing short sales.\5\ Among other
things, Regulation SHO imposes a close-out requirement to address
failures to deliver stock on trade settlement date and to target
potentially abusive short selling in certain equity securities.
---------------------------------------------------------------------------
\4\ 17 CFR 242.200(a).
\5\ 17 CFR 242.200(a).
---------------------------------------------------------------------------
As adopted, Regulation SHO included two major exceptions to the
close-out requirement: The ``grandfather'' provision and the ``options
market maker'' exception. Due to our concerns about the potentially
negative market impact of large and persistent fails to deliver, and
the fact that we continued to observe threshold securities with fail to
deliver positions that are not being closed out under existing delivery
and settlement requirements, effective on October 15, 2007, we adopted
an amendment to Regulation SHO that eliminated the ``grandfather''
exception to Regulation SHO's close-out requirement.\6\ The options
market maker provision excepted any fail to deliver position in a
threshold security resulting from short sales effected by a registered
options market maker to establish or maintain a hedge on options
positions that were created before the underlying security became a
threshold security. On September 17, 2008, we adopted and made
immediately effective an amendment to Rule 203(b)(3) of Regulation SHO
to eliminate the options market maker exception to the rule's close-out
requirement.\7\
---------------------------------------------------------------------------
\6\ See Release No. 34-56212 (Aug. 7, 2007) [72 FR 45544].
\7\ See Release No. 34-58572 (Sept. 17, 2008).
---------------------------------------------------------------------------
On September 18, 2008, the Commission issued an Emergency Order
pursuant to section 12(k)(2) of the Exchange Act \8\ requiring
institutional investment managers to report information concerning
their short sales of section 13(f) securities on a weekly basis.\9\ We
amended the Order on September 21, 2008 to clarify certain technical
issues and the public availability of the information provided by the
institutional investment managers.\10\ On October 2, 2008, we extended
the Order's effectiveness through October 17, 2008, and stated that the
Forms SH filed under the Order would remain nonpublic to the extent
permitted by law.\11\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78l(k)(2).
\9\ Release No. 34-58591.
\10\ Release No. 34-58591A (Sept. 21, 2008) [73 FR 58987].
\11\ Release No. 34-58724 (Oct. 2, 2008) [73 FR 58987-01].
Release 34-58724, together with Release 34-58591 and 34-58591A are
collectively referred to as the Emergency Orders.
---------------------------------------------------------------------------
Under the terms of the Emergency Orders, institutional investment
managers that exercise investment discretion with respect to accounts
holding securities described in Rule 13f-1(c) under the Exchange Act
\12\ that have an aggregate fair market value of at least $100,000,000,
and effect short sales of those securities generally are required to
file Form SH with the Commission on a weekly basis. The Form SH filing
currently must be made on the first business day of each calendar week
following a week in which the institutional investment manager has
effected short sales with respect to any section 13(f) security that is
not an option.\13\ With respect to each applicable section 13(f)
security, the Form SH filing must identify the issuer and CUSIP number
of the relevant security and reflect the manager's start of day short
position, the number and value of securities sold short during the day,
the end of day short position, the largest intraday short position, and
the time of the largest intraday short position.
---------------------------------------------------------------------------
\12\ 17 CFR 240.13f-1(c).
\13\ Our discussion here and elsewhere in the release regarding
the need to disclose short sales and short positions assumes that
the reporting exception, which is described in Section II.A.3, does
not apply.
---------------------------------------------------------------------------
To make clear that continuous reporting of open short positions
previously reported on Form SH was not required when no new short sales
had been effected during the calendar week covered by the next Form SH
filing due to be filed, the Emergency Orders stated that no Form SH
filing is required when no short sales of a section 13(f) security have
been effected since the previous filing of a Form SH.\14\ Further, an
institutional investment manager need not report certain information
regarding short sales and positions that otherwise would be reportable
on Form SH if:
---------------------------------------------------------------------------
\14\ Similarly, under the Emergency Orders no Form SH filing is
required when all short sales of section 13(f) securities that have
been effected since the last day of the prior reporting period for
which a Form SH was due qualify for the reporting exception.
---------------------------------------------------------------------------
The short sale or position in the section 13(f) security
constitutes less than one-quarter of one-percent of that class of the
issuer's section 13(f) securities issued and outstanding, as reported
on the issuer's most recent annual or quarterly report, and any
subsequent current report, filed with the Commission pursuant to the
Exchange Act, unless the manager knows or has reason to believe that
the information contained therein is inaccurate; and
The fair value market of the short sale or position in the
section 13(f) security is less than $1,000,000.
II. Purposes of the Interim Final Temporary Rule
As explained in the Emergency Orders requiring Form SH filings, and
other emergency orders under section 12(k) of the Exchange Act,\15\ we
are concerned by sudden and excessive fluctuation of securities prices
and disruptions in the fair and orderly functioning of the securities
markets. We are concerned about possible unnecessary or artificial
price movements that may be based on unfounded rumors and may be
exacerbated by short selling.
---------------------------------------------------------------------------
\15\ See also Release Nos. 34-58166 (July 15, 2008) [73 FR
42837] and 34-58572 (Sept. 17, 2008) [73 FR 58698].
---------------------------------------------------------------------------
We note that regulators in several foreign jurisdictions also have
adopted rules requiring disclosure of short sales and net short
positions. For example, the Netherlands Authority for the Financial
Markets (AFM) requires daily disclosure to the AFM of net short
positions greater than 0.25% of the capital of financial institutions
listed on the Euronext Amsterdam stock exchange. The UK Financial
Services Authority (FSA) requires daily disclosure to UK exchanges of
net short positions greater than 0.25% of the ordinary stock of UK
financial institutions listed in the United Kingdom.
The Commission believes that requiring the filing of the
information on Form SH will provide useful information to the staff to
analyze the effects of our rulemakings relating to short sales and in
evaluating whether our current rules are working as intended,
particularly in times of financial stress in our markets. The reports
will supply the Commission with important information about the size
and changes in short sales of particular issuers by particular
investors. That information will be available to the Commission to
consider when questions about the propriety of certain short selling
occur.
Because of these concerns, we are extending the requirements to
file the Forms SH until August 1, 2009 with the following modifications
to the reporting requirements:
Beginning on October 18, 2008, the Form SH weekly filing
deadline will be the last business day of the calendar
[[Page 61680]]
week following a calendar week in which short sales are effected
instead of the first business day as required by the Emergency Orders.
This change will provide filers with additional time to gather and
verify the necessary information and file the forms.
Form SH filers will no longer be required to disclose the
value of the securities sold short (currently column 5 of Form SH), the
largest intraday short position (currently column 7 of Form SH) and the
time of day of the largest intraday short positions (currently column 8
of Form SH). We understand that some of this information has been
difficult for filers to obtain.
Form SH filers will be required to report all short
positions, including short positions effected prior to September 22,
2008, when reporting data elements 5, 6 and 7, Short Position (Start of
Day), Number of Securities Sold Short (Day) and Short Position (End of
Day). We believe this additional data will assist with our goals of
tracking short sale activity.
The threshold for reporting short sales or positions will
be raised from a fair market value of $1 million to a fair market value
of $10 million. We have raised this threshold due to the new
requirement to disclose pre-September 22, 2008 short sales and
positions.\16\
---------------------------------------------------------------------------
\16\ Under the Emergency Orders, institutional investment
managers did not have to disclose short sales effected, and
positions held, prior to September 22, 2008.
---------------------------------------------------------------------------
Filers will be required to submit an XML tagged data file
to the Commission providing the requested data. This new requirement
will facilitate the review of the filed data by the Commission staff.
III. Interim Final Temporary Exchange Act Rule 10a-3T and Form SH
We are adopting interim final temporary Exchange Act Rule 10a-3T
(Rule 10a-3T) to require institutional investment managers to continue
filing Form SH in a form that is substantially similar to that required
by the Emergency Orders. Adoption of the interim final temporary rule,
which will be effective immediately and will continue in effect until
August 1, 2009, will facilitate our review of our regulation of short
sales. We have included several requests for comment in this release.
We will consider public comments on Rule 10a-3T and Form SH in
determining whether we should revise the interim final temporary rule
or Form SH in any respect, as well as whether we should promulgate a
longer-term or permanent short sale reporting requirement upon
expiration of Rule 10a-3T and Form SH on August 1, 2009. We intend to
address any comments received in a subsequent release.
A. Description of Rule 10a-3T
Exchange Act Rule 10a-3T requires certain institutional investment
managers that exercise investment discretion \17\ with respect to
accounts holding section 13(f) securities \18\ to file a nonpublic Form
SH on a weekly basis if they have effected short sales with respect to
a section 13(f) security during the reporting period preceding the due
date of the filing.
---------------------------------------------------------------------------
\17\ For purposes of this rule, the term ``investment
discretion'' has the same meaning as in Rule 13f-1(b) under the
Exchange Act. [17 CFR 240.13f-1(b)].
\18\ The term ``section 13(f) securities'' is defined in Rule
13f-1(c) under the Exchange Act [17 CFR 240.13f-1(c)] to include
securities of a class described in Section 13(d)(1) of the Exchange
Act [15 U.S.C. 78m(d)(1)] that are admitted to trading on a national
securities exchange or quoted on the automated quotation system of a
registered securities association. In determining what classes of
securities are section 13(f) securities, an institutional investment
manager may rely on the Official List of Section 13(f) Securities
published by the Commission available at https://www.sec.gov/
divisions/investment/13flists.htm.
---------------------------------------------------------------------------
1. Institutional Investment Managers Required To Report Short Sales
Rule 10a-3T requires institutional investment managers to keep
track of certain short sale transactions and file Form SH to report
them. The rule requires the filing of Form SH by those institutional
investment managers that: (1) As of the end of the most recent calendar
quarter, filed, or were required to file, a Form 13F for the calendar
quarter; and (2) during a Sunday to Saturday calendar week effected a
short sale in a section 13(f) security other than options.\19\ The
manager is required to file a Form SH report with the Commission on the
last business day of the ensuing calendar week. By limiting the Form SH
reporting requirement to institutional investment managers that are
required to file Form 13F, we subject only those institutional
investment managers that exercise investment discretion with respect to
accounts holding section 13(f) securities that have an aggregate fair
market value on the last trading day of any month of the previous
calendar year of at least $100 million to the Form SH reporting
requirement.\20\
---------------------------------------------------------------------------
\19\ As adopted, the rule differs from the requirement of the
Order which applied to institutional investment managers that were
required to file Form 13F for the quarter ended June 30, 2008.
Because the temporary rule will be in effect until August 1, 2009,
the temporary rule refers instead to the previous calendar quarter.
\20\ See 17 CFR 240.13f-1(a)(1).
---------------------------------------------------------------------------
We are applying the rule only to Form 13F filers because they
exercise discretion over large accounts that have significant potential
to affect the markets. In addition, these filers already are subject to
Exchange Act reporting and in most instances, the Emergency Orders, and
therefore are familiar with using the Commission's EDGAR system to
submit filings. In addition, the Form SH reporting requirement applies
only to section 13(f) securities, which include equity securities of a
class described in section 13(d)(1) of the Exchange Act that are
admitted to trading on a national securities exchange or quoted on the
automated quotation system of a registered securities association,
because this is a useful and tested term that is well-suited to capture
the information we are seeking.
Request for Comment
Rule 10a-3T limits reporting of short sales and short
positions to institutional investment managers that are required to
file Form 13F. Should we continue to require Form SH reporting by these
institutional investment managers? Should we require only a subset of
these institutional investment managers to file Form SH reports? If so,
how should we limit the type of institutional investment manager that
we require to file Form SH? Should we instead require a different set
of persons to file Form SH? Are there categories of persons that
conduct a significant amount of short sales but who are not required to
submit Form SH because they are not institutional investment managers
required to file Form 13F? If so, which categories of short sellers
should be subject to Form SH reporting? Would it be appropriate to
require anyone who conducts short sales or has short positions in
excess of specified thresholds, such as those in Rule 10a-3T(b)(2)(ii),
to report?
Are there other, better ways to collect information about
short sales than by requiring Form SH?
Should we require short sellers to keep current detailed
books and records of their short sale activities and their short
positions, of the sort required under Rule 17a-3(a)(6) under the
Exchange Act? \21\ If so, should we require short sellers to retain the
name of the broker, the number of shares, the price, the issuer name,
the time and date of entry of the order, the time and date of execution
of the order, the type of order (limit or market), the locate source or
exception to locate claimed, the contact at the locate, the time and
date when the locate was received, the amount of shares located, the
time and
[[Page 61681]]
date of the borrow, the number of shares borrowed, the source from
which they were borrowed, and where the borrowed shares are located?
Should we require other information be maintained?
---------------------------------------------------------------------------
\21\ 17 CFR 240.17a-3(a)(6).
---------------------------------------------------------------------------
In the alternative, or in addition, should we require all
short sellers to publicly provide a notice filing when their short sale
activity or positions cross a specific threshold that would be deemed
significant? If so, what information should the notice filing contain?
If a notice filing is required, should it be filed with us on a
nonpublic basis? Would there be any concerns about publicly filing such
a notice? Would such a notice filing provide useful information to
investors? Would requiring all short sellers to keep detailed records
of their short sale activities and filing when necessary a notice
filing relating to those activities raise any other concerns, such as
concerns about the potential costs? In the alternative, should we
instead require short sellers to produce books and records upon request
from the Commission?
2. Short Sales and Short Positions Required To Be Reported
Rule 10a-3T requires an institutional investment manager to report
short sales and short positions, as defined in Rule 200 of Regulation
SHO. Rule 200 defines a short sale to mean any sale of a security which
the seller does not own or any sale which is consummated by the
delivery of a security borrowed by, or for the account of, the
seller.\22\ For purposes of Rule 10a-3T, a short position is the
aggregate gross short sales of an issuer's section 13(f) securities
(excluding options), less purchases to close out a short sale in the
same issuer. The Form SH short position is not net of long position in
the issuer. If a person that has loaned a security to another person
sells the security and a bona fide recall is initiated within two
business days after trade date, the person that has loaned the security
is deemed to own the security for purposes of Rule 200(g)(1) and Rule
200(b) of Regulation SHO, and such sale will not be treated as a short
sale.\23\ Rule 10a-3T is intended to broadly require institutional
investment managers to account for their short sales.
---------------------------------------------------------------------------
\22\ 17 CFR 242.200.
\23\ For staff guidance regarding how sales of loaned but
recalled securities should be treated for purposes of the Emergency
Orders, see the Division of Trading and Market Guidance Regarding
Sale of Loaned but Recalled Securities available at https://
www.sec.gov/divisions/marketreg/loanedsecuritiesfaq.htm.
---------------------------------------------------------------------------
Options and short sales of options on section 13(f) securities are
not required to be reported on Form SH. However, certain transactions
that involve options are required to be reported.\24\ For example, if
an institutional investment manager exercises a put and is net short
pursuant to Rule 200(c) of Regulation SHO, the resulting transaction is
a short sale and must be reflected on Form SH. Similarly, if the
institutional investment manager effects a short sale as a result of
assignment to it as a call writer, upon exercise, the resulting
transaction is a short sale and must be reflected on Form SH.
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\24\ Short sales resulting from the exercise of option contracts
are reportable as of the date of the exercise.
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Request for Comment
Rule 10a-3T is limited to reporting on short sales and
short positions of section 13(f) securities, other than options. Should
we continue to require disclosure about short sales of these section
13(f) securities? Should we limit the securities that institutional
investment managers are required to report on to a subset of these
securities, such as equity securities of financial institutions? Would
it be more appropriate for the Form SH reporting requirement to cover
all publicly traded equity securities regardless of whether they are
listed on a national securities exchange or quoted on the automated
quotation system of a registered securities association? Should we
require reporting on Form SH for transactions relating to any equity
security of a company reporting under the Exchange Act?
Rule 10a-3T requires reporting of the start of day short
position, the gross number of securities sold short during the day and
the end of day short position. Does requiring reporting of this
information have the effect of reducing manipulative behavior and other
improper conduct by short sellers? Do these categories of information
provide the most useful data for analyzing short selling activities and
combating market manipulation? If not, are there other benefits that
Form SH information will provide? Are there other categories of
information that we should require that would be useful to our
objectives, such as transaction audit trails or the portion of the
number of securities sold short in foreign markets?
Do the definitions of the terms short sale and short
position that we use in Rule 10a-3T adequately capture the types of
transactions on which the Commission should focus? Should we use
definitions for the terms short sale or short position in Rule 10a-3T
that are different from the Regulation SHO definitions? If so, how
should we define these terms?
How can we best address the risk that managers may try to
evade reporting by conducting short sales through synthetic instruments
or through third parties that are not required to report on Form SH?
Should we require disclosure of these transactions as well? Should we
amend the rule to require filers to report any synthetic arrangements
that function as short sales and provide Form SH information for those
positions and identify the parties to those transactions? How would we
define or describe these transactions? Should we require any short
seller that is entering the short to hedge a synthetic position entered
into with another party to identify the other party in Form SH?
Should we revise Rule 10a-3T to require disclosure of
options and short sales of options? Should Rule 10a-3T require
disclosure of other financial instruments such as single stock futures?
Rule 10a-3T requires information to be reported to the
Commission. Should the rule require this information to be provided to
the self-regulatory organizations? If so, which self-regulatory
organizations should receive this information? Should we work with the
exchanges and self-regulatory organizations to capture this
information? Would these organizations be well equipped to monitor the
data that we are requesting?
Should we consider harmonizing our short sale reporting
and regulation with foreign regulators? Would it be appropriate to
require similar short sale reporting to that implemented by the FSA in
the United Kingdom? \25\ What aspects would be more or less
appropriate?
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\25\ See information on the short selling instruments issued in
September 2008 at the Financial Services Authority Web site at
https://www.fsa.gov.uk/pages/Library/Policy/Handbook/short-
selling.shtml.
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3. Exceptions to the Filing and Reporting Requirements
Rule 10a-3T does not require an institutional investment manager to
file a Form SH to report short sales and positions if: \26\
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\26\ Unlike the requirements under the Emergency Orders, the
rules we adopt today require short sales or positions effected prior
to September 22, 2008, to be reported.
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The institutional investment manager has not effected any
short sales of section 13(f) securities during the reporting period
covered by the Form SH due to be filed; or
[[Page 61682]]
On each calendar day during the calendar week, the start
of day short position, the gross number of securities sold short during
the day and the end of day short position constitute less than one-
quarter of one percent of that class of the issuer's section 13(f)
securities issued and outstanding as reported on the issuer's most
recent annual, quarterly or current report filed with the Commission
pursuant to section 13 of the Exchange Act, unless the manager knows or
has reason to believe the information contained therein is inaccurate
and the fair market value of the start of day short position, the gross
number of securities sold short during the day and the end of day short
position is less than $10,000,000.\27\
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\27\ For purposes of determining whether the $10,000,000
threshold is met, the manager should multiply the number of shares
the manager sold short that day by the market price as of the time
of the close of trading at the NYSE on that day.
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Once a determination is made that a Form SH filing is required,
Rule 10a-3T permits an institutional investment manager to disclose in
the appropriate data element its reliance on this exception with
respect to information otherwise required to be reported. The
institutional investment manager may disclose ``N/A'' in the
appropriate data element to report the number of securities sold short
or corresponding information regarding the short position in that class
where the data element falls below the reporting threshold. The
exception limits the substantive disclosure required on Form SH to
significant short sales and positions that have the potential to
materially affect the price of the underlying securities. This
limitation is designed to strike a balance between the burden of
compiling and providing the information to the Commission and the need
for information about short sales to be available to the Commission.
We are clarifying in accordance with staff guidance provided in
conjunction with the Emergency Orders that institutional investment
managers may act as conduits for customer orders by handling such
orders on a ``riskless principal'' \28\ basis in the following
scenarios, which may result in the broker-dealer effecting a short
sale: (i) A broker-dealer receives an order to sell a section 13(f)
security from a customer who is net long on the securities being sold,
and the broker-dealer then seeks to execute that order, either in whole
or in part, by selling the section 13(f) security as riskless
principal, and the broker-dealer has an overall net short position in
such section 13(f) security; or (ii) a broker-dealer receives an order
to buy a section 13(f) security from a customer, and the broker-dealer
then seeks to execute that order, either in whole or in part, by
purchasing the section 13(f) security as riskless principal, and then
selling the section 13(f) security to the customer, and the broker-
dealer has an overall net ``short'' position in such section 13(f)
security. In both scenarios, the short sales need not be reported by
the broker-dealer on Form SH.
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\28\ A ``riskless principal'' transaction is generally described
as trades in which, after receiving an order to buy (or sell) from a
customer, the broker-dealer purchases (or sells) the security from
(or to) another person in a contemporaneous offsetting transaction.
See Exchange Act Rule 10b-10(a)(2)(ii)(A) [17 CFR 240.10b-
10(a)(2)(ii)(A)]; Release No. 34-33743 (Mar. 9, 1994) at n.11.
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We are eliminating the ``grandfather'' provision that was included
in the Form SH filing conditions set forth in the Emergency Orders. The
Emergency Orders did not require disclosure of existing or outstanding
short positions in section 13(f) securities held before the September
22, 2008 effective date of the initial order. This grandfather
provision was established primarily to address concerns about the
public disclosure of institutional investment managers' pre-existing
short positions before we indicated that Form SH filings would be made
on a nonpublic basis. One of the commenters on the Emergency Orders
noted that a consequence of the grandfather provision is that some Form
SH filers will have to keep two sets of books until all of the pre-
September 22 positions are cleared out.\29\
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\29\ See letter from the Securities Industry and Financial
Markets Association dated October 9, 2008 available in file No. S7-
24-08.
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Under Rule 10a-3T, Form SH filers will be required to report all
short positions, including short positions effected prior to September
22, 2008, when reporting data elements 5, 6 and 7, Short Position
(Start of Day), Number of Securities Sold Short (Day) and Short
Position (End of Day) on Form SH. We believe that the additional data
about the pre-September 22 positions will improve our efforts to
analyze short sale activity.
In connection with elimination of the grandfather provision, we are
revising the exception to the Form SH filing requirements. Under the
Emergency Orders, Form SH filers are not required to report short sales
or short positions otherwise reportable if: The short sale or short
position in the section 13(f) security constitutes less than one-
quarter of one per cent of that class of the issuer's section 13(f)
securities issued and outstanding, as reported on the issuer's most
recent Exchange Act report; and the fair market value of the short sale
or short position in the section 13(f) security is less than $1
million. We are raising the threshold for filing and reporting short
sales or short positions in a class of section13(f) securities other
than options from a fair market value of $1 million to a fair market
value of $10 million primarily due to the new requirement for
institutional investment managers to report information about their
pre-September 22 short positions. In addition, we note that the
threshold is intended to ensure that small percentage positions that
comprise large monetary positions are reported, and we believe that $10
million more suitably addresses this concern.
An institutional investment manager that is required to file a Form
SH report on October 24, 2008 or October 31, 2008 may exclude
disclosure of short positions reflecting short sales effected before
September 22, 2008 from the Form SH report filed on either or both of
those dates. However, if the manager excludes such disclosure, the
relevant fair market threshold for reporting short sales or positions
is the $1 million threshold.
Request for Comment
Is the exception in Rule 10a-3T to Form SH reporting of
short sales that fall below the specified thresholds appropriate? If
so, are the thresholds set at appropriate levels, or should they be
higher or lower? What threshold would be appropriate? Should we use 5%
as in Regulation 13D \30\ or is a smaller threshold, such as 2.5%, more
appropriate? If you suggest a different type of exception to Form SH
reporting, please describe the exception that you think is appropriate.
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\30\ 17 CFR 240.13d-1 et seq.
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Is the reporting exception in Rule 10a-3T for ``riskless
principal'' transaction appropriate? If not, why not and what would be
the best way to address ``riskless principal'' transactions in the
rule?
Should we continue to use a significance test that couples
a percentage of shares outstanding threshold with a fair market value
threshold? Should the percentage and market value thresholds be
combined or should they be separate standards? If separate, what level
should each be set at? Would $1 million or $10 million be appropriate?
Would 1%, 2.5% or 5% be appropriate? Should we instead adopt a
threshold that is tied to the number of shares sold short or some other
standard?
As adopted, a manager is required to report its short
sales and short
[[Page 61683]]
positions. However, managers often take short positions in order to
hedge the risk on long positions in which they invest and not for
speculative purposes. Should we develop an exemption that would permit
managers to avoid reporting of hedging short positions or in the
alternative require additional information that explains the purposes
of various short positions? If so, how would we best develop the
exemption or the request for additional information and how would we
define hedging transactions? Would such an exemption be useful? Would
it subsume the purpose of the rule?
4. Transition and Expiration Dates of Rule 10a-3T
As noted above, the Commission remains concerned by sudden and
excessive fluctuation of securities prices and disruptions in the fair
and orderly functioning of the securities markets. We are adopting this
temporary rule to continue the reporting obligations established in our
Emergency Orders as modified. For the reasons those Orders were adopted
and for the reasons explained in this release, no gap between the
reporting obligations of the Emergency Orders and the obligations
established by this rule should exist. In addition, we received a
variety of comments from the public about the Emergency Orders, which
were valuable in developing this interim temporary final rule. As a
result, this rule is immediately effective.
In order to assist with the transition, institutional investment
managers that are required to file a Form SH report on October 24, 2008
or October 31, 2008, must comply with Rule 10a-3T, except that they may
exclude disclosure of short positions reflecting short sales before
September 22, 2008 from the Form SH report filed on either or both of
those dates. An institutional investment manager may choose to exclude
these short sales effected before September 22 if the short position in
the section 13(f) security constitutes less than one-quarter of one
percent of that class of the issuer's securities issued and outstanding
as reported on the issuer's most recent annual or quarterly report, and
any current report subsequent thereto, filed with the Commission
pursuant to the Exchange Act, unless the manager knows or has reason to
believe that the information contained therein is inaccurate, and the
fair market value of the short position in the section 13(f) security,
as of September 22, 2008, was less than $1,000,000. In addition,
institutional investment managers do not have to file Form SH in XML
format in accordance with the special filing instructions posted on the
Commission's Web site for their Form SH reports on October 24, 2008 or
October 31, 2008. Instead, the institutional investment manager may
file Form SH on EDGAR in the same manner as the form was filed pursuant
to the Emergency Orders dated September 18, 2008, September 21, 2008
and October 2, 2008.
Subsequently, beginning with the calendar week ending November 1,
2008, institutional investment managers are required to report as
specified in Rule 10a-3T and the filer instructions as to the assembly
of the EDGAR submission provided on the Commission's Web site at http:/
/www.sec.gov/info/edgar/ednews/formshsubmission.htm or in a future
update of the EDGAR Filer Manual. Rule 10a-3T will expire and cease to
be effective on August 1, 2009 unless we act to continue or revise the
rule and extend the effective date.
Request for Comment
How long should institutional investment managers be
required to file Form SH reports with the Commission? Is the period
extending until August 1, 2009 that we are adopting appropriate? Should
we require Form SH reporting beyond August 1, 2009?
B. Form SH
1. Timing and Nonpublic Nature of Form SH
Rule 10a-3T requires institutional investment managers to report
certain short sales to the Commission on Form SH. Under Rule 10a-3T,
institutional investment managers must file Form SH on the last
business day of each calendar week following a week in which the
institutional investment manager has effected certain short sales with
respect to any section 13(f) security that is not an option.\31\
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\31\ The Form SH is required to be filed electronically on the
Commission's EDGAR system on or before 5:30 p.m. Eastern Time on the
last business day of the calendar week.
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This is a change from the Form SH filing deadline set forth in the
Emergency Orders which required Form SH to be filed on the first
business day of each calendar week immediately following a week in
which the institutional investment manager effected certain short
sales. This change will provide filers with additional time to gather,
verify and file the data, decreasing the burden on the filers without
affecting the efficacy of the information to the staff.
As we explained in our October 2008 Order, we are concerned that
publicly available Form SH data could give rise to additional,
imitative short selling. Accordingly Rule 10a-3T states that all Forms
SH filed with the Commission will be nonpublic to the extent permitted
by law. The Freedom of Information Act provides at least two exemptions
under which the Commission has authority to withhold the
information.\32\ A Form SH filer should not submit a confidential
treatment request to the Commission. A Form SH filer must label its
Form SH as non-public, as required by the instructions to the form.
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\32\ The Freedom of Information Act (``FOIA'') Exemption 4
provides an exemption for ``trade secrets and commercial or
financial information obtained from a person and privileged or
confidential.'' FOIA Exemption 8 provides an exemption for matters
that are ``contained in or related to examination, operating, or
condition reports prepared by, on behalf of, or for the use of an
agency responsible for the regulation or supervision of financial
institutions.''
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Request for Comment
Form SH requires detailed reports regarding institutional
investment managers' significant short positions in section 13(f)
securities. Are there better ways for the Commission to gather short
selling information and address our concerns than by using Form SH? Are
the detailed reports required on Form SH appropriate? Is there any
information that should be required in, or deleted from, the
requirements of the Form?
When requiring reporting of short positions, should we
generally only require reporting of new positions, or should we require
reporting of all short positions? Does requiring reporting of all short
positions create significant additional burdens on filers? If so, what
burdens and how can they best be addressed?
Form SH requires filers to report the short position at
the start of the day, the aggregate number of securities sold short on
that day, and the short position at the end of the day. Is this
information sufficient to provide an adequate understanding of the
filer's short sale activity during the day? Should we require filers to
report their net long and short positions in addition to the
information already required? Is it sufficient to simply track the net
short positions and not to report the start and end of day positions
and the aggregate activity?
As adopted, Form SH no longer requires reporting of the
daily value of securities sold short, the largest intraday short
position and the time of day of that short position. We understand that
some institutional investment managers have had significant difficulty
[[Page 61684]]
identifying the largest intraday short position and the time of day of
that short position. This information may be helpful in identifying
manipulative short selling. How difficult is it for filers to track and
report this information? Should we require filers to report this
information? Is there an alternative way to track this kind of
information and better identify when manipulative short selling may be
taking place?
Rule 10a-3T provides that the information required by Form
SH shall remain nonpublic to the extent permitted by law. Institutional
investment managers have expressed concern about making this
information public. Should the information required by Form SH be
publicly reported? Would concerns about public reporting be alleviated
if there was a delay in filing the information, such as a delay of 10
days, or 45 days after the end of a quarter in which the transaction
occurred, similar to the 45-day deadline for Form 13F filings? Would
concerns be alleviated if the information was reported by the
institutional investment manager on a nonpublic basis, but made public
after a delay on an issuer basis?
If the Form SH remains nonpublic, what is the best way to
require filers to report the Form SH information to the Commission? Is
EDGAR the best vehicle for reporting Form SH information to the
Commission? If not, what vehicle would be superior and why?
We are permitting institutional investment managers to
provide the information required by Form SH on the last business day
following a calendar week in which the institutional investment manager
effected a short sale. Are there concerns with permitting institutional
investment managers with extra time to provide the information to the
Commission? Is the extra time sufficient time to address concerns about
the need for more time to be able to provide the information in a
timely fashion? Should we change the weekly reporting period so it is
not based on a calendar week?
Institutional investment managers are required to file
Form SH for any week during which they make a reportable short sale. Is
it appropriate to require the filing of Form SH on a weekly basis?
Should we require the filing to be made more frequently, such as daily?
Should we require the filing less frequently, such as bi-weekly,
monthly or quarterly, to reduce the filing burden? Would we be able to
capture short selling information as effectively if Form SH reports
were required to be filed less frequently?
2. Form SH
Under the Emergency Orders, Form SH may be filed in ASCII or HTML.
We are adopting rules that require that short sale and position
information to be filed in XML tagged data format and additional
identification within the data file. By requiring reporting in XML, the
Commission staff will be able to more easily analyze the data that we
receive. Based on our experience with reporting under the Emergency
Orders, we are reducing the data that institutional investment managers
are required to report to the Commission by removing the requirement
that managers report the value of securities sold short during the day,
the largest intraday short position and the time of day of the largest
intraday short position.
We understand that some filers have found it difficult to obtain
and burdensome to track and report the largest intraday short position
disclosure, and the time thereof. We are no longer requiring disclosure
of the value of securities sold short during the day as our staff has
the ability to perform this calculation without the disclosure from the
institutional investment manager.
There are three Form SH report types: Form SH Entries Report, Form
SH Notice and Form SH Combination Report. An Entries Report is filed if
all of the information that an institutional investment manager is
required to report is included in the Form SH filing; a Notice is filed
if all of the information that a manager is required to include in the
XML tagged data file is reported by another Manager; a Combination
Report is filed if a portion of the manager's entries are filed in the
manager's report and a portion are reported by another manager. When
filing a Form SH Notice or Combination Report, the manager is required
to disclose the other managers that are reporting for the manager.
Rule 10a-3T requires filers to format the Form SH data differently
than under the Emergency Orders, but will similarly include:
Disclosure of the time period of the report;
An indication of whether the report is an amendment;
The name and address of the institutional investment
manager;
A representation by the signer;
A signature block for the person signing the form;
An indication of the report type;
A list of any other managers reporting for the manager
filing the report;
The total number of transactions reported;
A list of other managers for whom the Form SH is filed;
and
The number of other included managers.\33\
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\33\ Additional information the manager wishes to report may be
included on the Form SH provided that the information does not,
either by its nature, quantity, or manner of presentation, impede
the understanding or presentation of the required information. Only
information requested by the Form SH and its instructions is
permitted in the XML tagged data file.
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In addition, the Form SH will include, where applicable, an XML
tagged data file that provides much of the information that was
previously required by the Emergency Orders to be included in the
Information Table. The XML tagged data file will provide the
information regarding short sales, including:
The date;
The Central Index Key (CIK) of the filer;
The name of the issuer;
The CUSIP of the issuer;
The short position at the start of the day;
The number of securities sold short on that day; and
The short position at the end of the day.
The XML data elements provide the bulk of the required disclosure
in Form SH and are limited to the information requested in the
instructions to the form. Data elements 1 through 4 provide the date,
identify the manager by CIK, and the name and CUSIP of the issuer. Data
Elements 5 and 7 require the manager to report the number of securities
that represent the manager's short position in the issuer as of the
start and end of each calendar day during the reporting period. Data
element 6 requires the manager to report the gross, not net, number of
securities in the issuer that the manager sold short for each calendar
day during the reporting period.
When determining the disclosure required in the XML tagged data
file, an institutional investment manager may apply the exclusion in
Rule 10a-3T(b)(2)(ii) on a day-by-day and data element-by-data element
basis. For example, if a filer has triggered a filing obligation for a
given calendar week, has start and end of day short positions on a
particular day that do not qualify for the reporting exception, but
does not effect any short sales on that day, the filer would disclose
the appropriate numbers under elements 5 and 7 and enter zero under
element 6. Using the same facts, if the filer did engage in short sales
during that particular day but those sales in the aggregate met the
reporting exception, the filer may enter
[[Page 61685]]
``N/A'' under element six. ``N/A'' can to be used any time a filer has
a filing obligation and is omitting information under the reporting
exception.
To the extent still relevant, institutional investment managers may
look to the staff guidance provided pursuant to the Emergency Orders
regarding reporting short sales and positions on Form SH such as the
Guidance Regarding the Commission's Emergency Order Concerning
Disclosure of Short Selling provided by the staff of the Divisions of
Corporation Finance, Investment Management, and Trading and Markets
available at https://www.sec.gov/divisions/marketreg/
shortsaledisclosurefaq.htm.
Request for Comment
Is the XML tagged data file format more easily generated
than an ASCII document in columned or delimited format? Would XBRL
tagged data be a preferred solution? Are there any other technology
issues resulting from the use of XML tagged data format? Do filers have
the ability to submit the XML tagged data by November 7, 2008?
Should delimited ASCII text data be considered for
transaction data? If the data is to be provided to the public, which
data file format would be preferred? If the data is to be provided to
the public, is there an advantage to using XML because a style sheet
can be used to present XML data elements in a readable format?
IV. Other Matters
The Administrative Procedure Act generally requires an agency to
publish notice of a proposed rulemaking in the Federal Register.\34\
This requirement does not apply, however, if the agency ``for good
cause finds * * * that notice and public procedure are impracticable,
unnecessary, or contrary to the public interest.'' \35\ Further, the
Administrative Procedure Act also generally requires that an agency
publish an adopted rule in the Federal Register 30 days before it
becomes effective.\36\ This requirement, however, does not apply if the
agency finds good cause for making the rule effective sooner.\37\ The
Commission, for good cause, finds that notice and solicitation of
comment before Rule 10a-3T and Form SH is impracticable, unnecessary,
or contrary to the public interest.
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\34\ See 5 U.S.C. 553(b).
\35\ Id.
\36\ See 5 U.S.C. 553(d).
\37\ Id.
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For the reasons we discussed throughout this release, we believe
that we have good cause to act immediately to adopt this rule and form
on a temporary interim final basis. As discussed throughout this
release, we are concerned by recent sudden and excessive fluctuation of
securities prices and disruptions in the fair and orderly functioning
of the securities markets and believe that the nonpublic submission of
Form SH may provide the Commission with useful information to combat
market manipulation that threatens investors and our capital markets.
Adopting the rules as interim temporary rules also will minimize any
disruption in reporting by institutional investment managers of their
short sale activities. Avoiding such disruption should obviate the need
for those managers to stop and restart their reporting apparatus and
should allow us uninterrupted access to the information in the reports
during a time of significant market upheaval.
Rule 10a-3T takes effect on October 18, 2008. For the reasons
discussed above, we have acted on a temporary interim final basis. We
emphasize that we are requesting comments on the temporary rule and
will carefully consider any comments that we receive. We intend to
respond to the comments in a subsequent release. Moreover, this is a
temporary rule that will expire on August 1, 2009. Setting a
termination date for the rule will necessitate further Commission
action no later than the end of that period if the Commission
determines to continue the same, or similar, requirements contained in
the temporary rule. The Commission finds that there is good cause to
have Rule 10a-3T and Form SH effective as temporary interim rules on
October 18, 2008 and that notice and public procedure in advance of
effectiveness of the rules are impracticable, unnecessary and contrary
to the public interest.\38\
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\38\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the rules to become effective notwithstanding the
requirement of 5 U.S.C. 801 (if a federal agency finds that notice
and public comment are ``impractical, unnecessary or contrary to the
public interest,'' a rule ``shall take effect at such time as the
federal agency promulgating the rule determines.'').
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V. Paperwork Reduction Act
A. Background
Temporary Exchange Act Rule 10a-3 relates to a ``collection of
information'' requirement within the meaning of the Paperwork Reduction
Act of 1995 (PRA).\39\ The title for the information collection is
``Form SH'' (OMB Control No. 3235-0646). An agency may not conduct or
sponsor, and a person is not required to respond to, a collection of
information unless it displays a current valid control number.
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\39\ 44 U.S.C. 3501 et seq.
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The Office of Management and Budget (``OMB'') approved Form SH on
September 19, 2008 in connection with the Commission's issuance of the
Emergency Order to require institutional investment managers to file
Form SH with the Commission.\40\ We submitted revised burden estimates
to OMB for review and approval in accordance with 44 U.S.C. 3507(j) and
5 CFR 1320.13. Separately, we submitted the revised burden estimates to
OMB for review and approval in accordance with 44 U.S.C. 3507(d) and 5
CFR 1320.11. OMB has approved the revised Form SH burden estimates
related to our adoption of Rule 10a-3T on an emergency basis.
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\40\ Release No. 34-58591.
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B. Summary of Rule 10a-3T and Form SH Burden Estimates
Rule 10a-3T will require certain institutional investment managers
that exercise investment discretion with respect to accounts holding
section 13(f) securities that have an aggregate fair market value of at
least $100,000,000 to file Form SH on a weekly basis during the period
covered by this interim rule. The Form SH filing must be made on the
last business day of each calendar week following a week in which the
institutional investment manager has effected any short sale with
respect to any section 13(f) security that is not an option. Form SH is
filed on a nonpublic basis and compliance is mandatory.
With respect to each applicable section 13(f) security, the Form SH
filing must reflect the number of securities sold short during the day,
as well as the start of day short position and end of day short
position, for that security on each calendar day of the prior week in
which the institutional investment manager engaged in trading activity
with respect to short sales. No Form SH filing is required when no
short sales of a section 13(f) security have been effected during the
reporting period to be covered by the Form SH filing or where all short
sales and short positions are below the following thresholds on each
day of the calendar week to be covered by the report:
The short sales and short positions in the section 13(f)
security constitute less than one-quarter of one-percent of that class
of the issuer's section 13(f) securities issued and outstanding as
reported on the issuer's most recent annual or quarterly report, and
any current report subsequent thereto, filed with the Commission
pursuant to the Exchange Act, unless the manager knows or has reason to
believe that the
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