As we advised you in our Fall Compliance Update, on October 3, 2011, the U.S. Securities and Exchange Commission’s ("SEC") new Rule 13h-1, under Section 13(h) of the Securities Exchange Act of 1934, became effective. The purpose of the new rule is to assist the SEC in identifying and obtaining trading information on market participants that are involved in a large amount of trading activity in the U.S. securities markets.
The new rule imposes new filing requirements on "Large Traders," and new recordkeeping, reporting and monitoring requirements on broker-dealers. Rule 13h-1 defines Large Trader as: any person or entity, including investment advisers, that directly or indirectly exercises investment discretion over one or more accounts and effects transactions for the purchase or sale of any [exchange-listed] security for or on behalf of such accounts, by or through one or more registered broker-dealers, in an aggregate amount equal to or greater than either 2 million shares or $20 million in a single day or 20 million shares or $200 million in a calendar month. There are a limited number of exceptions to the definition of Large Trader including trades related to gifts, distributions of estates, court-ordered transactions, exercises or assignments of options contracts, and the creation of ETFs.
Rule 13h-1 requires a Large Trader to identify itself to the SEC and make certain disclosures on Form 13H. The information requested by Form 13H includes basic identifying information, the name of the organization and any affiliates, an organizational chart, a description of the nature of the firm’s business, a list of forms the firm filed with the SEC, the names of each general partner and executive officer, director and trustee, and a list of broker-dealers where the trader has an account. The Form 13H will be kept confidential by the SEC and will be exempt from Freedom of Information Act requests.
Upon receipt of Form 13H, the SEC will assign the Large Trader an identification number known as an LTID. The Large Trader must provide its LTID to each registered broker-dealer effecting transactions on its behalf. The registered broker-dealer(s) are required to maintain records concerning the Large Trader’s trades.
Organizations that are required to file Form 13H have until December 1, 2011 to do so. Please Note: Your firm is only required to file Form 13H by December 1, 2011 if your firm placed any qualifying trades from the effective date, October 3, 2011, through December 1, 2011. If your firm has not placed any trades during that time period that would require it to register as a Large Trader, the firm must file a Form 13H within ten days of qualifying as a Large Trader. After making an initial Form 13H filing, your firm must continue to file Form 13H annually. Further, if any information contained within the form becomes inaccurate or out-dated, an amended filing must be made by the end of the calendar quarter. If your firm has filed Form 13H, but during the previous calendar year did not place a trade that qualified as a large trade, it can make a filing to request "inactive" status and re-activate whenever necessary.
Please Note: The above discussion is a Summary only. Should you have any questions regarding how Rule 13h-1 and the Form 13H requirements will affect your firm, we remain available to address same. Should your firm be required to file Form 13H, Stark & Stark is prepared to make your initial filing and any subsequent annual filing.
Please Note: all 13H filings MUST be filed on the EDGAR system. Our staff can help you obtain the proper EDGAR system log-in if you do not currently use the EDGAR system.
Please contact Janet Canela (firstname.lastname@example.org), Cathy Pike (email@example.com) or Ann Cirillo (firstname.lastname@example.org) for additional information.