Finding A Way.

Are You Ready to Comply With the New Large Trader Reporting Rule?

adviser compliance attorneyThis summer, the Securities and Exchange Commission adopted a new rule establishing large trader reporting requirements. The rule is designed to enhance the agency’s ability to identify large market participants, collect information on their trading, and analyze their trading activity. The compliance date for the initial filing was December 1.

Under Rule 13h-1, a “large trader” is defined as a person whose transactions in exchange-listed securities equal or exceed two million shares or $20 million value during any calendar day, or 20 million shares or $200 million value during any calendar month. Large traders are required to identify themselves to the SEC via a new form (13H). The SEC will then assign each trader a unique identification number. Large traders must provide this number and the accounts to which it applies to broker-dealers effecting trades on their behalf.

Below are a few common questions and answers you may have regarding the new rule and form:

  • What if a market participant does not trade in the aggregate above the thresholds every month or day? A market participant would still have to file Form 13H promptly once it reached the relevant threshold on a calendar day or month. A trader that has not reached the identifying activity level at any time during the prior calendar year may file for “inactive status” and would no longer be required to file amendments to its Form 13H.
  • Does the triggering activity level apply to a single security or all of a firm’s trading for the day/month? The thresholds are triggered by the aggregate trading activity of the firm, not per security.
  • Are mutual funds securities that count towards the thresholds? How about debt securities? Mutual funds (except exchange-traded funds or ETFs) are not exchange-listed securities and do not count.  Although a debt security could theoretically be a security for purposes for Form 13H, we are currently not aware of a debt security that would fall under this definition.
  • Should a firm aggregate purchases and sales? Yes, the rule and form require aggregation, no offsetting or netting.
  • When does a firm have to file amendments to Form 13H? A large trader must file an amendment promptly following the end of a calendar quarter when there are any changes to the form. There is no materiality threshold for amendments. All changes must be reported quarterly.
  • If a firm does not want to monitor its trading levels, can it register voluntarily? Yes.

The entire list of questions and answers published by the Investment Adviser Association is available here.

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