Enter to open, tab to navigate, enter to select
SEC Registration on Form 13H For Large Traders Required by December 1, 2011
Practical Law Legal Update 7-513-5528 (Approx. 3 pages)
SEC Registration on Form 13H For Large Traders Required by December 1, 2011
by PLC Corporate & Securities
| Published on 22 Nov 2011 • USA (National/Federal) |
Under new Rule 13h-1 under the Securities Exchange Act of 1934, large traders, as defined in the rule, must register with the SEC by December 1, 2011.
New Rule 13h-1 under the Securities Exchange Act of 1934 (Exchange Act) requires "large traders," as defined in the rule, to register with the SEC by filing Form 13H by December 1, 2011.
Both domestic and foreign entities and individuals may be covered under Rule 13h-1's definition of large trader. The definition is triggered by an entity or individual directly or indirectly exercising investment discretion over accounts and effecting transactions exceeding certain monetary thresholds for the purchase or sale of national market system (NMS) securities through registered broker dealers. The term NMS securities is defined in Rule 600 of Regulation NMS, and includes US-listed equities and options. The rule also permits voluntary registration.
Rule 13h-1's definition of large trader is not limited to frequent traders, meaning even a single transaction that meets the rule's thresholds could cause an entity to meet the definition. However, for purposes of determining whether an entity is a Rule 13h-1 large trader, some common capital markets and business combination transactions do not count. These include, among others:
- Registered and unregistered primary securities offerings that are not effected through the facilities of a national securities exchange.
- Issuer self-tenders and stock buybacks (including buybacks under Rule 10b-18).
- Transactions to effect a business combination, including reclassifications, mergers, consolidations or tender offers subject to Section 14(d) of the Exchange Act.
Large traders that register on Form 13H:
- Receive a large trader identification number, which they must provide to all of the US registered broker-dealers effecting transactions on their behalf.
- Must make updated filings on an annual basis and make amended filings more frequently if information changes. The rule includes a provision for traders that previously registered to file for inactive status or to terminate their status as large traders under certain circumstances.
Rule 13h-1 also creates recordkeeping, reporting, and monitoring requirements for US registered broker-dealers that execute transactions for large traders. These requirements become effective on April 30, 2012.
For more information on Rule 13h-1, see the SEC's press release.
Rule 13h-1 is intended to enhance the SEC's ability to analyze and investigate major market events, such as the sudden price movements that the market experienced during the "flash crash" of May 6, 2010. For a discussion of other recent SEC and self-regulatory organization activities in response to the flash crash, see Legal Update, National Exchanges and FINRA Propose Revisions to Market-wide Circuit Breakers. For more information on the flash crash, see this CFTC and SEC report.