SEC Requires Disclosure of Hedge Fund and Other Institutional Investors Short Positions into 2009
On an emergency basis, the SEC adopted a new disclosure rule requiring hedge funds and other large investors to disclose their short positions. Prepared by the staffs of the Divisions of Investment Management and Corporation Finance, the new rule was designed to ensure transparency in short selling. Hedge fund managers with more than $100 million invested in securities are required to promptly begin public reporting of their daily short positions. The managers currently report their long positions to the SEC. The rule was to expire on October 16, 2008, after having been extended by the Commission. But the SEC acted to extend the rule to
August 1, 2009, with modifications in the reporting.
(See Release No. 34-58785).
Specifically, under the initial rule, institutional investment managers required to file a Form 13F for the calendar quarter ended June 30, 2008 must file a report on new Form SH with the SEC on the first business day of every calendar week immediately following a week in which it effected short sales. Form SH must be filed electronically on EDGAR, but will not be publicly available for two weeks pursuant to an amended order.
The Commission decided that Form SH should be initially filed on a non-public basis. The agency reasoned that non-public submission of Form SH may help prevent artificial volatility in securities as well as further downward swings that are caused by short selling, while at the same time providing the SEC with useful information to combat market manipulation that threatens investors and capital markets.
Two weeks after the due date for the Forms SH, the Commission will make the Forms available to the public. The SEC believes that by two weeks after the due date the reasons to maintain the information as non-public will have diminished. New Form SH requires disclosure of the number and value of securities sold short for each Section 13(f) security, except for short sales in options, and the opening short position, closing short position, largest intraday short position, and the time of the largest intra-day short position, for that security during each calendar day of the prior week.
In the release extending the required disclosure to 2009, the SEC said that the Form SH weekly filing deadline will be the last business day of the calendar week following a calendar week in which short sales are effected instead of the first business day as originally required. This change is designed to provide filers with additional time to gather and verify the necessary information and file the forms.
Also, Form SH filers will no longer be required to disclose the value of the securities sold short (currently column 5 of Form SH), the largest intraday short position (currently column 7 of Form SH) and the time of day of the largest intraday short positions (currently column 8 of Form SH). The SEC has learned that some of this information has been difficult for filers to obtain. The threshold for reporting short sales or positions will be raised from a fair market value of $1 million to a fair market value of $10 million. Hedge funds will also be required to submit an XML tagged data file to the Commission providing the requested data in order to facilitate the review of the filed data by the Commission staff.