On September 21, 2008, the Securities and Exchange Commission (the “Commission”) issued amendments to its September 18, 2008 Emergency Order (Release No. 58591) requiring that institutional investment managers who filed or were required to file a Form 13F for the quarter ended June 30, 2008 make weekly reports of their daily short positions in section 13(f) securities on the newly created Form SH (the “First Amended Emergency Order”).
The First Amended Emergency Order provides for confidential treatment of the information disclosed on Form SH for two weeks after the filing of such form, in addition to certain technical changes to the reporting process.
The Commission also issued amendments to its September 18, 2008 Emergency Order (Release No. 34-58592)(the “Original Order”) that prohibited the short selling of any publicly traded securities of certain of the nation’s banks, insurance companies, securities firms and other financial institutions (the “Second Amended Emergency Order”). The Second Amended Emergency Order addresses technical and operational concerns related to the Original Order.
The following summarizes the key points of the First Amended Emergency Order and the Second
Amended Emergency Order. Amended Emergency Order Requiring Institutional Money Managers to Report New Short Sales
In an attempt to maintain fair and orderly securities markets, while still gaining information to help prevent market manipulation, the Commission issued the First Amended Emergency Order allowing for Form SH to be initially filed on a non-public basis. The information disclosed on Form SH, however, will be made available to the public on the Commission’s EDGAR system two weeks after such form is filed with the Commission.
As a result of the First Amended Emergency Order, each reporting institutional investment manager must label Form SH as non-public by clearly marking the top and bottom of each page with the phrase “NON-PUBLIC.” This phrase must appear on every page of the entire Form SH, including the Cover Page, Summary Page and Information Table. The First Amended Emergency Order did not otherwise change the timing of the Form SH submission or content. Accordingly, the first Form SH filing will still be filed electronically using the Commission’s EDGAR system on September 29, 2008.
The First Amended Emergency Order took effect on September 22, 2008 and, unless extended, will terminate on October 2, 2008. As a result, unless the First Amended Emergency Order is extended, it appears that only one Form SH (the Form SH required to be filed on September 29, 2008) will be required under the First Amended Emergency Order. A Form SH is not required to be filed if no reportable short sales were entered into in the prior week.
Amended Emergency Order Prohibiting Certain Short Sales
In an attempt to ensure smooth operation of orderly markets and to harmonize the Original Order with similar foreign regulation, the Commission issued the Second Amended Emergency Order. The Second Amended Emergency Order provides as follows:
- The list of included financial institutions covered by the Original Order will be amended and no longer be determined by the SEC. Instead, each national securities exchange will be responsible for determining and publishing on its website the financial institutions covered by the Second Amended Emergency Order on that exchange. The listing exchanges, upon an issuer’s request, can exclude that issuer’s securities from the list.
- Certain short sales in covered financial institutions’ securities (i) resulting from the expiration of futures contracts held before the Original Order’s effective date or (ii) resulting from an assignment to call writers upon exercise will be permitted.
- The narrow exception contained in the Original Order for bona fide market makers will not apply if the market maker knows that the transaction will result in an increased net short position in securities of a covered financial institution.
- Persons effecting sales pursuant to Rule 144 of the Securities Act of 1933, as amended, in a covered financial institution’s securities will be exempted from the Original Order.
The Second Amended Emergency Order did not otherwise change the Original Order which, unless extended, will terminate on October 2, 2008.