Sadis & Goldberg LLP

December 1, 2011 - Compliance Date For Large Traders To File Form 13H


On July 26, 2011, the Securities and Exchange Commission (the "SEC") adopted Rule 13h-1 (the "Rule") which requires "large traders" to provide the SEC with detailed trading information by filing Form 13H by December 1, 2011.

 

The Rule defines a "large trader" as any person that directly or indirectly, including through other persons controlled by such person, exercises investment discretion over one or more accounts and effects transactions for the purchase or sale of any NMS security[1] for or on behalf of such accounts, by or through one or more registered broker-dealers, in an aggregate amount equal to or greater than either:

 

  • two million shares or shares with a fair market value of $20 million during a calendar day; or
  • twenty million shares or shares with a fair market value of $200 million during a calendar month.  

 

After filing an initial Form 13H, large traders will be given a large trader identification number (LTID) to provide to registered broker-dealers who effect transactions on their behalf. Subsequent to the initial filing, large traders will have to file various periodic updates to Form 13H with the SEC.

 

Registered broker-dealers will be required to keep records and report large trader transaction information to the SEC upon request. For those account holders who have not identified themselves as large traders, but that the broker-dealer knows or has reason to know are large traders, the broker-dealers must monitor their securities transactions and notify them of the requirement to register with the SEC. Registered broker-dealers will be required to comply with the recordkeeping, reporting and monitoring requirements starting on April 30, 2012.

 

The compliance date to file an initial Form 13H is December 1, 2011. We recommend that you review your current transactions in listed equity securities or exchange-traded options in light of these new requirements and contact us to discuss Form 13H filings.

  

If you have any questions regarding this Alert, please contact Daniel G. Viola at 212.573.8038 or dviola@sglawyers.com or  Lance Friedler at 212.573.8030 or lfriedler @sglawyers.com. 

 

[1] An "NMS security" is "any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in listed options." 17 CFR 242.600(b)(46).  

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Whistleblower rules -- most hedge fund employees can bypass internal compliance....


 

Sam Lieberman, Of Counsel in the Litigation Group of Sadis & Goldberg has contributed an article to the June 9th edition of Thompson Reuters Accelus entitled "Whistleblower rules – most hedge fund employees can bypass internal compliance, but have no remedy for internal report retaliation”. 

 

On May 25, 2011, the SEC adopted final rules implementing the whistleblower provisions of the Dodd-Frank Act (whistleblower rules or Rules). The Rules permit most employees to bypass internal compliance programs and report fraud allegations directly to the SEC to obtain a whistleblower award. Instead, only certain key employees must report fraud internally before they can become eligible for an award, including officers, directors, partners, and compliance and internal audit personnel. Separately, the SEC has clarified that employees of private firms like hedge funds are not protected against retaliation for internally reporting wrongdoing. Thus, although the whistleblower rules will somewhat bolster hedge fund internal compliance programs by incentivizing key employees to report internally, the Rules also create strong incentives for most employees to bypass internal compliance. Further, the Rules will leave key hedge fund employees in a Catch-22 of being required to report wrongdoing internally to get an award, and often as a job requirement, while having no legal remedy for retaliatory firing. This will harm internal compliance programs by chilling key employees from robustly investigating and reporting wrongdoing posing a threat to employers.

 

To read the full article, please click on the link below: 

 

 http://www.sglawyers.com/_Handlers/FileHandler.ashx?type=library&id=132

 

If you would like to discuss the article in greater detail with Sam, his contact information is below.

 

Sam Lieberman, 212.573.8164, slieberman@sglawyers.com

 

 

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New SEC Personnel Emphasize More Focused Adviser Examinations


The U.S. Securities & Exchange Commission ("SEC") has significantly increased its examination and enforcement efforts in recent times. SEC examinations may be routine or based on specific cause. Cause examinations typically begin with an unannounced visit from the SEC. The purpose of the SEC examinations are to protect investors by determining whether advisers are complying with the law, adhering to the disclosures that they have provided to their clients, and maintaining appropriate compliance programs to ensure compliance with the law. While few businesses expect to become the subject of government investigations, it happens every day. Planning for an SEC examination is a critical part of an adviser's operations and preparation is vital.

 

The SEC will continue to hire and appoint experienced personnel designed to strengthen SEC examinations. On January 4, 2010, Mr. Carlo V. di Florio was named the Director of the SEC's Office of Compliance Inspections and Examinations ("OCIE"), which was formerly headed by Lori Richards. Mr. di Florio was formerly with PricewaterhouseCoopers ("PwC"), where he was a partner in the Financial Services Regulatory Practice and one of the PwC's national leaders in corporate governance, enterprise risk management, and regulatory compliance and ethics. As head of OCIE, Mr. di Florio is required to oversee the SEC's nationwide examination programs for investment advisers, broker/dealers, mutual funds, credit rating agencies, and self-regulatory organizations among other entities. Mr. di Florio has experience with investigating corporate fraud, corruption, conflicts of interest and money laundering and has directed international teams and engagements across numerous jurisdictions around the world.[1]

 

"A strong inspections and examinations unit is instrumental to the SEC's investor protection efforts. Investors rely on our examiners to ensure that their financial professionals comply with the law," said SEC Chairman Mary Schapiro, in a statement. "Carlo brings the energy, insight, and experience necessary to ensure that we keep pace with the rapid changes in the industry and continue to build upon the reforms of the past year."[2]

 

Mr. di Florio will also work closely with the SEC's recently created investigative units and their leaders as follows: asset management, headed by Bruce Karpati and Robert Kaplan; market abuse, led by Daniel Hawke; structured and new products, Kenneth Lench; foreign corrupt practices, Cheryl Scarboro; and municipal securities and public pensions, Elaine Greenberg.

 

Remember, the best time to consider your options is before you get the call. We advise our clients with regard to registration, compliance obligations, informal inquiries, no-action letters, examinations, formal investigations and enforcement actions. We also draft compliance manuals, create internal controls and perform mock audits. Please feel free to contact Daniel G. Viola at 212.573.8038 (or dviola@sglawyers.com) regarding your compliance needs or with any questions.

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[1] http://www.sec.gov/news/press/2010/2010-1.htm

[2] Id.

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