SEC Extends Large Trader Reporting Compliance Dates for Broker-Dealers | Practical Law

SEC Extends Large Trader Reporting Compliance Dates for Broker-Dealers | Practical Law

The SEC issued an order extending the dates for broker-dealer compliance with the large trader recordkeeping, reporting, and monitoring requirements of Rule 13h-1 under the Exchange Act. Additionally, the SEC permanently exempted a number of capital markets transactions from Rule 13h-1's definition of "transaction" for determining whether a person is a large trader.

SEC Extends Large Trader Reporting Compliance Dates for Broker-Dealers

Practical Law Legal Update 0-519-1202 (Approx. 3 pages)

SEC Extends Large Trader Reporting Compliance Dates for Broker-Dealers

by PLC Corporate & Securities
Published on 24 Apr 2012 • USA (National/Federal)
The SEC issued an order extending the dates for broker-dealer compliance with the large trader recordkeeping, reporting, and monitoring requirements of Rule 13h-1 under the Exchange Act. Additionally, the SEC permanently exempted a number of capital markets transactions from Rule 13h-1's definition of "transaction" for determining whether a person is a large trader.
On April 20, 2012, the SEC issued an order extending the dates for broker-dealers to comply with the large trader recordkeeping, reporting, and monitoring requirements of Rule 13h-1. Rule 13h-1 requires certain broker-dealers to maintain specific records of transactions effected for large traders and report this information to the SEC electronically as requested. The extension follows requests by the Financial Information Forum (FIF) and SIFMA to delay the implementation dates of the rule. FIF and SIFMA argued that broker-dealers need additional time to perform the business analysis, development and testing required to implement the rule's requirements, and the SEC agreed with the industry groups' comments.
The compliance dates for Rule 13h-1 recordkeeping and reporting have been extended from April 30, 2012 to:
  • November 30, 2012, for registered broker-dealers with large trader customers that are either US registered broker-dealers or that trade through a "sponsored access" arrangement. A sponsored access arrangement is one in which a broker-dealer permits a large trader customer to enter orders directly to a trading center, and not through the broker-dealer's own system.
  • May 1, 2013, for all other registered broker-dealers.
The SEC is also extending the compliance date for the requirement that broker-dealers monitor their customers' accounts for large trader activities to May 1, 2013.
Additionally, the SEC permanently exempted a number of capital markets transactions from Rule 13h-1's definition of "transaction" for determining whether a person is a large trader. The exempted transactions include:
  • Transactions that are part of an offering of securities by or on behalf of an issuer, or by an underwriter on behalf of an issuer, or an agent of an issuer, regardless of whether:
    • the offering is subject to Securities Act registration; or
    • the transaction is effected through the facilities of a national securities exchange.
  • Sales of securities by a selling shareholder in connection with an IPO or in a registered secondary offering, if:
    • the selling shareholder is a current or former employee of the issuer; and
    • the securities being sold were acquired as part of the shareholder's compensation as an employee of the issuer.
For more information on Rule 13h-1, see Legal Update, SEC Registration on Form 13H For Large Traders Required by December 1, 2011.