On October 15, 2008, the Securities and Exchange Commission ("SEC" or the "Commission") adopted an interim temporary final rule (.pdf) (the "Interim Rule" or "Rule 10a-3T) requiring institutional investment managers (those required to file Form 13F) to report information concerning daily short sales of securities. The previous emergency order regarding the filing requirements was due to terminate on October 17, 2008. The Interim Rule will take effect beginning October 18, 2008 and extend until August 1, 2009 unless it is terminated or extended.

Under the Interim Rule, the reporting requirements are similar to the previous emergency orders except for the following modifications:

  • Beginning on October 18, 2008, the Form SH weekly filing deadline will be the last business day of the calendar week following a calendar week in which short sales were 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, the largest intraday short position and the time of day of the largest intraday short positions. The Commission understood 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 short position at the start of the day, the number of securities sold short during the day and short position at the end of the day. Please note that the requirement to report short positions effected prior to September 22, 2008 will not be required for the filings due by October 24 and October 31, 2008, but the filer will not be able to take advantage of the new $10 million de minimis exemption (described below) unless it reports ALL short positions.
  • 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. The Commission raised this threshold due to the new requirement to disclose pre-September 22, 2008 short sales and positions.
  • To facilitate the SEC's review, filers will be required to submit an XML tagged data file to the Commission providing the requested data but this will not be required for the filings due by October 24 and October 31, 2008. Instead the filer may file the Form SH on EDGAR in the same manner as the Form SH was filed pursuant to the emergency orders.

Under the Interim Rule, an institutional investment manager will not be required to file Form SH with respect to a particular calendar week if:

  • It effected no short sales of a Section 13(f) security during that week; or
  • On each calendar day during that week, (a) 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 (0.25%) of that class of the issuer's Section 13(f) securities issued and outstanding and (b) 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 million.

Once it has been determined that a Form SH filing is required, an institutional investment manager is not required to include in the Form "insignificant" short sales or short positions, specifically those where:

  • On any day of the week covered by the Form SH, (a) the start of day short position, the gross number of securities sold short during the day and the end of day short position in a Section 13(f) security constitutes less than one-quarter of one percent (0.25%) of that class of the issuer's Section 13(f) securities issued and outstanding and (b) 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 million.

Under the emergency order, the SEC stated that Form SH filings would be "nonpublic to the extent permitted by law." In the release adopting the Interim Rule, the SEC reaffirms that position and states that at least two exemptions under the Freedom of Information Act give the SEC the authority to withhold Form SH data from public disclosure. Furthermore, the release explains that while filers should continue to label the top and bottom of each page of a Form SH filing with the word "NON-PUBLIC" (in bold and capital letters), filers should not submit a confidential treatment request to the SEC.

The SEC has requested comments on several aspects of the Interim Rule and has indicated that it intends to address such comments in a future release.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.