Today, the Securities and Exchange Commission issued a press release related to short sale regulations, which, among other things, announced that Temporary Rule 10a-3T, or the Form SH rule, will NOT be renewed and thus will expire according to schedule on August 1, 2009.
In the press release (which you can view here), the SEC announced several actions related to its efforts to protect against abusive short sales and make more short sale information available to the public. With respect to increasing transparency around short sales, the SEC stated that it is working together with several self-regulatory organizations (SRO) to make short sale volume and transaction data available through the SRO Web sites. The SEC believes this effort will result in a substantial increase over the amount of information related to short sale activity that is presently required to be disclosed on Form SH pursuant to Temporary Rule 10a-3T.
By way of reminder, Temporary Rule 10a-3T, which was adopted by the SEC on October 15, 2008, requires certain institutional investment managers that exercise investment discretion with respect to accounts holding section 13(f) securities to file a nonpublic Form SH on a weekly basis if they have effected short sales with respect to a section 13(f) security during the reporting period preceding the due date of the filing. The rule is due to expire on August 1, 2009, and instead of renewing the rule, the SEC and its staff, together with SROs, are working to substantially increase the public availability of short sale-related information through a series of other actions. Specifically, the Commission and its staff are working together with several SROs in the following areas:
- Daily Publication of Short Sale Volume Information. It is expected in the next few weeks that the SROs will begin publishing on their Web sites the aggregate short selling volume in each individual equity security for that day.
- Disclosure of Short Sale Transaction Information. It is expected in the next few weeks that the SROs will begin publishing on their Web sites on a one-month delayed basis information regarding individual short sale transactions in all exchange-listed equity securities.
- Twice Monthly Disclosure of Fails Data. It is expected in the next few weeks that the Commission will enhance the publication on its Web site of fails to deliver data so that fails to deliver information is provided twice per month and for all equity securities, regardless of the fails level.
In addition to announcing the new efforts described above with respect to increasing short sale transparency, the SEC also announced that (i) the SEC is making permanent interim final temporary Rule 204T, which seeks to reduce the potential for abusive “naked” short selling in the securities market, and (ii) the SEC intends to hold a public roundtable on September 30 to discuss securities lending, pre-borrowing, and possible additional short sale disclosures. Apart from these measures, the SEC is continuing to actively consider proposals on a short sale price test and circuit breaker restrictions that it proposed on April 8, 2009.
