SEC Adopts Large Trader Reporting Requirements

On July 26, 2011 the Securities and Exchange Commission adopted registration and reporting requirements for “large traders”: traders whose transactions in exchange-listed securities equal or exceed two million shares or $20 million a day, or 20 million shares or $200 million a month. From lawyers and law firms on JD Supra, five things large traders and their broker-dealers need to know about SEC Rule 13h-1:

1.  “Rule 13h-1 is intended to allow the SEC to effectively monitor the trading activity of market participants who conduct substantial trades whether in terms of volume or dollar amount. Under Rule 13h-1, large traders must self-identify and register with the SEC by filing Form 13H through EDGAR.” From SEC Adopts Rule for Large Trader Reporting by Foley Hoag LLP

2.  “Broker-dealers must maintain the records specified in Rule 13h-1 for all large traders and provide large trader transaction information to the SEC upon request. Broker-dealers will provide the required information to the SEC through the Electronic Blue Sheets system currently used by broker-dealers for reporting trade information.” From SEC Adopts Large Trader Reporting Rule by Katten Muchin Rosenman LLP

3.  “Broker-dealers apparently could have liability for failure to detect and track these ‘Unidentified Large Traders, unless they adopt policies and procedures reasonably designed to identify potential Unidentified Large Traders based on their account name, customer tax ID, and other available information, and then retain and provide to the SEC, upon request, transaction information for these persons.” From SEC Adopts Large Trader Reporting System by Morgan Lewis

4.  “A Large Trader parent is not required to separately comply with the identification and reporting requirements of the Rule if each of its controlled subsidiaries that exercise investment discretion over NMS securities complies with the Rule’s requirements with respect to all of the holding company’s or parent’s accounts.” From SEC Adopts Large Trader Reporting Requirements by Dechert LLP

5.  “Transaction data will be required to be available for reporting on the morning after the day the transactions were effected. When the SEC requests data from broker-dealers, it would not under normal circumstances require responses earlier than the opening of business on the day after it makes its request.” From SEC Adopts Large Trader Reporting Regime by Katten Muchin Rosenman LLP


Bonus update for the private equity crowd: Applicability of Large Trader Rules to Private Equity Advisers by Ropes & Gray LLP


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