As a follow up to our Foley Adviser on September 19, 2008, we have prepared answers to the following frequently asked questions regarding the Securities and Exchange Commission’s (“SEC” or the “Commission”) emergency order (the “Order”) requiring institutional investment managers to report information concerning daily short sales of securities.
What is Form SH?
A new form required by the SEC to report the entering into and closing of short positions. A copy of Form SH is available at http://www.sec.gov/about/forms/formsh.pdf and the instructions to Form SH are available at http://www.sec.gov/about/forms/formsh_instructions.pdf.
Who must file?
Institutional investment managers who filed (or were required to file) a Form 13F for the quarter ended June 30, 2008.
When is the filing required?
Every Monday by 5:30 p.m. EST, starting on September 29, 2008, assuming there was a reportable transaction during the immediately preceding 7 days. (The filing requirement will terminate on October 2, 2008, unless extended by the SEC.)
How is the filing made?
Form SH must be filed electronically and will be publicly available via the EDGAR database.
How soon will Form SH information be publicly available?
The information disclosed on Form SH will be non-public initially if the top and bottom of each page of the entire form is labeled “NON-PUBLIC” (in bold and capital letters). Even if so labeled, all information on Form SH will be made available to the public via EDGAR two weeks after filing.
What transactions are reportable?
Any short sale of any section 13(f) security, that is not an option, effected on or after 12:01 a.m. EST on September 22, 2008. A list of section 13(f) securities is available via the SEC’s website at http://www.sec.gov/divisions/investment/13f/13flist2008q2.pdf.
Are small short sales reportable?
An institutional investment manager need not report short positions otherwise reportable if both: (i) the short position in the section 13(f) securities constitutes less than 0.25% of the class of section 13(f) securities issued and outstanding as reported on the issuer’s most recent annual or quarterly report, and any current report subsequent thereto, unless the manager knows or has reason to believe the information contained therein is inaccurate; and (ii) the fair market value of the short position in the section 13(f) securities is less than $1,000,000.
What must be disclosed on Form SH?
Form SH requires similar cover page and summary page information about the reporting person as is required by Form 13F. The main body of Form SH consists of daily transaction data tables, which list each short position, the name and CUSIP number of the 13(f) security, the size of the short position (number of shares) at the start and the end of the day, the number of securities sold short during the day, the value of the securities sold short, the largest intra-day short position and the time of day of that position. Information must be reported separately for each day of the week covered by the report.
What about pre-existing short positions?
The disclosure requirements apply only to transactions effected on or after Monday, September 22, 2008. Furthermore, no reporting would be required with respect to the closing, on or after September 22, 2008, of a short position in place prior to September 22, 2008. In addition, there is no requirement that short positions need to be closed out.
What if I increase a pre-existing short position?
The SEC release adopting the Order indicates that the Order only applies to short sales effected on or after September 22, 2008. Therefore, if you already have a pre-existing short position in a particular security, information on Form SH will be given only with respect to any additional short position established in that security and not the aggregate short position in that security.