SEC Issues Interim Final Temporary Rule Extending Short Sale Reporting
October 20, 2008
As reported in previous Davis Polk communications, the SEC’s emergency orders requiring large institutional investment managers to report short sales in Section 13(f) securities on Form SH (collectively, the “Emergency Order”) expired at 11:59 p.m. on Friday, October 17. In anticipation of the Emergency Order’s expiration, on Wednesday, October 15 the SEC adopted new Rule 10a-3T under the Securities Exchange Act (the “Interim Rule”), which became effective on October 18 and will extend until August 1, 2009. The SEC is soliciting comments on the Interim Rule.
The Interim Rule generally extends the reporting requirements that were established by the Emergency Order. The most significant changes are summarized below.
Data provided in Form SH will be required to be submitted in XML format pursuant to new technical specifications that the SEC intends to provide, which are expected to be effective for the November 7 reporting date. Reports to be filed on October 24 or October 31 will utilize the same EDGAR format as required for previous reports (i.e., ASCII or HTML).
The Interim Rule and its accompanying release address two questions that had been raised by reporting managers. The first involves reporting short sales or positions in a particular security that are below the de miminis threshold on a particular day during a week for which Form SH is required to be filed. Some managers were confused as to whether any information needed to be reported at all on such days with respect to such securities. The Interim Rule and the release indicate that once a filing is required, a manager may apply the de minimis exception on a day-by-day and element-by-element basis, but that reliance must be documented by disclosing “N/A” in the data element where information would otherwise be required to be reported. In other words, the name of the issuer and the CUSIP apparently need to be reported each day, even if the manager’s short sales and/or short position in the security are de minimis.
The second question involves the confidentiality of submissions. We are aware that certain reporting managers who were concerned about public disclosure of their short positions on Form SH, even after the SEC’s October 2 announcement that the information would remain non-public, submitted separate requests for confidential treatment along with their filings. In the Interim Rule release, the SEC specifically states that a Form SH filer should not submit a confidential treatment request to the SEC and notes that the Freedom of Information Act provides at least two exemptions under which the SEC believes it may withhold Form SH information. Reporting managers should continue to label Form SH as non-public, as required by the form’s instructions. The Interim Rule provides explicitly that Form SH shall be “nonpublic to the extent permitted by law.”
See the Davis Polk client communications regarding the orders:
If you have any questions regarding this newsflash, please call your Davis Polk contact.