Rule 13h-1 Adopted by SEC
Today the SEC adopted new Rule 13h-1 which requires certain large traders to provide certain information regarding their trading activities to the SEC through a New Form 13H. A gross overview of the new reporting requirement are provided below.
Who is required to file Form 13H?
All “large traders” must file Form 13H.
A “large trader” is defined as a person whose transactions in exchange-listed securities equal or exceed two million shares or $20 million during any calendar day, or 20 million shares or $200 million during any calendar month.
The Form 13H is expected to look substantially similar to the Proposed Form 13H.
Large Trader Identification Number (LTID)
Each large trader which filed Form 13H will be given a LTID. The large trader will be required to provide their broker with the LTID so the broker can track all transactions attributable to the large trader and report such transactions to the SEC.
Large Trader Recordkeeping & Compliance Requirements
Broker-dealers with large trader clients are required to maintain certain records with respect to the transactions of their large trader clients. Such broker-dealers will be required to have large trader transaction data available the day after transactions are effected.
The effective date of new SEC Rule 13h-1 will be 60 days after the rule is published in the Federal Register. Large traders will have 60 days from the effective date of the new rule to file Form 13H with the SEC.
We will be able to provide more background on the rule as adopted shortly.
The final rule is likely to be similar to the Proposed Rule 13h-1.
The SEC release is reprinted below and can be found here.
SEC Adopts Large Trader Reporting Regime
FOR IMMEDIATE RELEASE
Washington, D.C., July 26, 2011 – The Securities and Exchange Commission today voted unanimously to adopt a new rule establishing large trader reporting requirements to enhance the agency’s ability to identify large market participants, collect information on their trading, and analyze their trading activity.
The new rule requires large traders to identify themselves to the SEC, which will then assign each trader a unique identification number. Large traders will provide this number to their broker-dealers, who will be required to maintain transaction records for each large trader and report that information to the SEC upon request.
“May 6 dramatically demonstrated the need to enhance the SEC’s ability to quickly and accurately analyze market events. The large trader reporting rule will significantly bolster our ability to oversee the U.S. securities markets in a time when trades can be transacted in milliseconds or faster,” said SEC Chairman Mary L. Schapiro. “This new rule will enable us to promptly and efficiently identify significant market participants and collect data on their trading activity so that we can reconstruct market events, conduct investigations, and bring enforcement actions as appropriate.”
The new rule has two primary components:
First, it requires large traders to register with the Commission through a new form, Form 13H.
Second, it imposes recordkeeping, reporting, and limited monitoring requirements on certain registered broker-dealers through whom large traders execute their transactions.
The new rule will be effective 60 days after its publication in the Federal Register.
Cole-Frieman & Mallon LLP is a hedge fund law firm which provides legal advice to both large and
start-up fund managers. Bart Mallon can be reached directly at 415-868-5345; Karl Cole-Frieman can be reached at 415-352-2300.