The SEC staff yesterday provided informal guidance with respect to the reporting of short sales and positions on Form SH pursuant to Temporary Rule 10a-3T (the “Temporary Rule”). Following release of the Temporary Rule on Oct. 15, 2008, questions were raised as to whether the Temporary Rule requires reporting of all short positions in section 13(f) securities during the reporting period, or just of short sales executed in section 13(f) securities during the reporting period. The Emergency Order issued on Sept. 18, 2008, instituting the Form SH filing requirement, only required filers to report with respect to section 13(f) securities they shorted during the reporting period (subject to a de minimis exception).

The SEC staff yesterday notified us and other industry representatives that they had reviewed this issue and concluded that whenever a Form SH report is required to be filed for a given week, the Form SH must report on short positions in all section 13(f) securities held during that week (subject to the de minimis exception).

  • No Form SH filing is required if there is no short selling in any section 13(f) security during the reporting period. (Rule 10a-3T section (b)(2)(i).) 
  • No Form SH filing is required if the only short selling in each section 13(f) security during the reporting period satisfies the de minimis exception. The de minimis exception applies if, on each calendar day of the reporting period, the start of day short position, gross number of short sales, and end of day short position all are less than 0.25% of the issuer’s shares and less than $10 million (or $1 million to the extent that the filer is availing itself of the phase-in period for the reports due on Oct. 24 and Oct. 31). (Rule 10a-3T section (b)(2)(ii).) 
  • If a Form SH filing is required, then all short positions in section 13(f) securities (even those in securities that were not sold short during the relevant week) held during the reporting period must be included in the Form SH filing, other than short positions in which the start of day short position, gross number of short sales, and end of day short position on each calendar day of the reporting period each satisfies the de minimis exception. (Rule 10a-3T section (b)(3)(i).) 
  • If a Form SH filing is required, and any one of the relevant data elements (start of day short position, gross short sales that day and end of day short position) are below the de minimis threshold, then that data field may contain an “N/A” instead of the number. (Rule 10a-3T section (b)(3)(i).) 
  • The phase-in period is still applicable. If filers elect to use the phase-in until the report due on Nov. 7, they may exclude short positions existing pre-Sept. 22 on the Oct. 24 and Oct. 31 Form SH reports (and the $1 million de minimis threshold applies). If filers elect not to use the phase-in period, they must include all pre-Sept. 22 short positions (and the $10 million de minimis threshold applies).
  • If filers are using the phase-in until the Nov. 7 report, they must still include in their Oct. 24 and Oct. 31 Form SH reports any short positions existing during the Sept. 22 through Oct. 18 period, subject to the de minimis exception discussed above, even if there was no short selling in those securities during the reporting period covered by the report. 
  • Beginning with the Form SH for the reporting period beginning on Oct. 26, 2008, all short positions—including those existing pre-Sept. 22, 2008—must be included in the Form SH report, subject to the de minimis exception discussed above. In other words, the phase-in period ends with the Form SH due on Nov. 7, which Form SH reports on short sales and short positions for the week beginning on Oct. 26.

The SEC staff has not released any written guidance or FAQ regarding the Temporary Rule and it is not clear whether they will do so.