[Federal Register Volume 59, Number 33 (Thursday, February 17, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-3427] [[Page Unknown]] [Federal Register: February 17, 1994] General Instructions for Form 13h The following instructions are intended for guidance in completing form 13H and do not provide the full text of the applicable federal laws and regulations. See section 13(h) of the Securities Exchange Act of 1934 [15 U.S.C. Sec. 78m(h)], rule 13h-1 [17 CFR 240.13h-1], and form 13H [17 CFR 249.327] for the full text of the applicable statutes and rules. A. Persons Required to File Form 13H. Every person that is a Large Trader must file Form 13H with the U.S. Securities and Exchange Commission (Commission). Upon filing Form 13H, a Large Trader will be assigned a large trader identification number (LTID) by the Commission. Definition of a Large Trader. The term ``Large Trader'' means every person who owns or controls an account, that effects transactions for the purchase or sale of a publicly traded securities, by use of any means or instrumentality of interstate commerce or the mails, or any facility of a national securities exchange, directly or indirectly by or through a registered broker or dealer, in an aggregate amount equal to or in excess of the identifying activity level. The term ``Person'' includes any natural person, trustee, company, government, political subdivision, agency, or instrumentality of a government, except foreign central banks, and also includes two or more persons acting as a partnership, limited partnership, syndicate, or other group. Persons that may be Large Traders include individuals, broker-dealers, mutual funds, private and public pension funds, hedge funds, investment advisers, insurance companies, banks, and trust companies. Large Trader Accounts. The purpose of Form 13H is to provide a system through which the Commission may efficiently identify large trading accounts and the person or group of persons that own and control large trading accounts. The term ``Account'' means each proprietary and customer account maintained or carried on the books and records of a registered broker-dealer. Ownership of Accounts. An account of a person is deemed to be owned or under common ownership of the natural person, company, limited partnership, partnership, and trustee in whose name an account is maintained, or custodian or nominee that maintains an omnibus account or account otherwise undisclosed as to ownership, and any other person who has more than a 10 percent financial interest in the equity in the accounts of the person. Control of Accounts. An account of a person is deemed to be controlled or under the common control of the owner of the account, and any other person that has received from or been assigned by the owner of an account, full or limited investment discretion or authority to direct transactions for the account. The term ``Full Discretionary Investment Authority'' means the discretion to enter an order or orders for the account of another of any size, at any time or price, without the prior instruction or approval of the owner of the account. The term ``Limited Discretionary Investment Authority'' means the discretion to enter an order or orders for the account of another, limited to time or price only, upon the express prior instruction or approval of the owner of the account. Large Trader Transactions. The term ``Transaction'' means all transactions in publicly traded securities, including cancellations, corrections, and exercises or assignments of option contracts, except for certain specific transactions. The excluded transactions, include: journal or bookkeeping entries; offerings of securities under the Securities Act of 1933; gifts; transactions effected under a court order of appointment or distribution of property in a decedents estate or divorce proceeding; a qualified rollover of retirement plan assets; or transactions between employees and employers that are part of an employer benefit or compensatory arrangement. The term ``Publicly Traded Securities'' includes all exchange listed and other national market system securities that are subject to an effective real-time transaction reporting plan. Identifying Activity Level. The term ``Identifying Activity Level'' means aggregate transactions of 150,000 shares or fair market value of $7.5 million, effected during any calendar day where the large trader's account is located, or any transactions that constitute program trading. The term ``program trading'' means index arbitrage or any strategy involving the related purchase or sale 15 or more securities with a total value of $1 million or more. Aggregation of Accounts. A person or group of persons may aggregate those accounts that are directly or indirectly owned or controlled, or under common ownership or control of a person or group of persons that independently would be large traders. A person or group of persons, however, must aggregate those accounts that are directly or indirectly owned or controlled, or under common ownership or control of a person or group of persons that independently would not be large traders. An aggregated Form 13H for a group of persons may be filed by any of the commonly owned or controlled persons within the group that independently would be a large trader. For example, diverse financial service holding companies or partnerships may have divisions, subsidiaries, or affiliated companies or partnerships, which independently are large traders, based on transactions effected by or for the accounts of the division, subsidiary, affiliate, or partner. These companies and partnerships would be permitted, but are not required, to aggregate into a single Form 13H all accounts owned or controlled by each division, subsidiary, affiliate, or partner. Conversely, the accounts of any division, subsidiary, affiliate, or partner that independently would not be a large trader would be required to be aggregated into the Form 13H filing of a parent, subsidiary, affiliate, or partner. Large Traders and authorized persons preparing and filing Form 13H should note that a person, or group of persons acting in concert toward a common investment objective, are prohibited from using the flexibility afforded by these rules to avoid filing Form 13H or to otherwise avoid the identification requirements of Rule 13h-1. Additionally, a person or group of persons that choose to aggregate accounts of persons that independently would be large traders should note that requests for disaggregation may be received from the Commission. Aggregation of Transactions. All transactions in publicly traded equity and option securities must be aggregated among or within aggregated accounts, without offsetting or netting purchase and sale transactions, and based upon the gross, un-hedged, or absolute value of all purchase and sale transactions. The ``gross value of an individual equity option'' is either: (i) the number of shares underlying the contract multiplied by the number of contracts purchased and sold; or (ii) the strike price of the contract multiplied by the applicable multiplier and the number of contracts purchased and sold. The ``gross value of options on a group or index of equity securities'' is the strike price of the contract multiplied by the applicable multiplier and the number of contracts purchased and sold. Transactions in index options are not required to be ``burst'' into share equivalents for each of the underlying component equities. The determination of ``who'' is a large trader and ``what'' information is to be included on form 13H are dependent upon the accounts or group of accounts that a large trader chooses to aggregate into a particular form 13H. Persons authorized to file form 13H should carefully review all general and special instructions regarding aggregation or disaggregation of accounts before filing form 13H. See special instructions to form 13H--item- 5--for further instructions regarding aggregation or disaggregation of accounts by a large trader. B. Form and Schedules Required to be Filed. Form 13H and Schedules may be filed manually or electronically in accordance with the rules and regulations the Commission may prescribe. If the filing is submitted manually, the filing shall include three (3) copies of Form 13H and Schedules. All Large Traders must complete and submit Form 13H and one or more of the Schedules to Items 6, 7, or 8. In addition, all Large Traders that check ``NO'' in Item 2, because they are not registered by or otherwise required to file information with the Commission, must complete Item 4 and submit one of the following three Schedules: (1) Individuals: Schedule 4a. (2) Joint Tenants or Partnerships: Schedule 4b. (3) Corporations or Trustees: Schedule 4c. All Large Traders that check ``YES'' in Item 2, and provide the applicable information regarding other registrations or filings with the Commission, are not required to complete Item 4 or any of the corresponding Schedules. See special instructions to form 13H--items 2 and 4--for further instructions regarding commission registrations or filings and the applicability of schedules 4a through 4c. C. Time Required for Filing Form 13H. Initial Filing. Form 13H and Schedules must be filed with the Commission within 10 business days after a person first effects transactions that reach the identifying activity level. Annual Filing. Form 13H and Schedules must be filed with the Commission within 60 calendar days after the end of each full calendar-year. Inactive Filing. A Large Trader may become inactive, thus exempt from the annual filing and disclosure requirements, upon filing its annual Form 13H for the previous full calendar year in which it has not effected: (1) aggregate transactions that equal or exceed the Identifying Activity Level; and (2) an aggregate calendar year total of 2,000,000 shares or fair market value of $30,000,000. Any inactive large trader that subsequently effects transactions that again reach the identifying activity level must make an initial filing within 10 business days after it effects the ``re-identifying transactions.'' D. Confidentiality. All information disclosed on Form 13H may not be compelled to be disclosed under the Freedom of Information Act (``FOIA'') because the information is specifically exempted from disclosure by Section 13(h)(7) of the Securities Exchange Act of 1934, and the statute establishes particular criteria for withholding or refers to particular types of information to be withheld. The Commission, however, is not authorized to withhold information from Congress, or any other federal department or agency requesting information for purposes within the scope of its jurisdiction, or complying with an order of a court of the United States in an action brought by the United States or the Commission. Special Instructions for Form 13H and schedules A. Instructions for Form 13H--Cover Page. Type of Filing. Indicate the type of Form 13H filing by checking the appropriate box at the top of the cover page to Form 13H. If the filing is an ``Initial Filing'' indicate the first date on which transactions were effected that reached the identifying activity level. An initial filing must include a manually signed Form 13H and all applicable Schedules. If the filing is an ``Annual Filing'' indicate the ending date of the appropriate calendar year and list the specific Items or Schedules that are amended or changed. An annual filing must only include a manually signed cover page and those pages of Form 13H or Schedules that have been amended or changed. If no Items or Schedules to Form 13H have been amended or changed, indicate ``NONE'' in the space provided and only file a manually signed cover page to Form 13H. If the filing is an ``Inactive Filing'' indicate the date that the Large Trader last effected aggregate transactions that reached the identifying activity level. A Large Trader shall become inactive, and exempt from the annual filing and LTID disclosure requirements, upon filing. If the filing is a ``Corrected Filing'' indicate the type and date of the filing that is being corrected. This type of filing is not required but may be made to correct a previous filing. All filings should indicate the applicable LTID assigned by the Commission and the Taxpayer Identification Number(s) of the Large Trader. Initial filings will not be required to include a LTID. In addition, all filings should disclose the Depository Trust Company (``DTC'') Institutional Delivery System (``ID System'') number(s) of the Large Trader that are applicable to the accounts identified in the specific Form 13H. An inactive large trader that effects re- identifying transactions will retain the LTID initially assigned to it by the Commission. The unchanged or unamended portions of a large trader's form 13H and schedules need not be filed annually. B. Instructions for Form 13H--Items 1 Through 5. Item 1. Business of the Large Trader. Specify the type of business of the Large Trader by checking one or more of the listed business types. If the Large Trader is an individual, check ``Other'' and specify the occupation of such individual. Large Trader banks, trust companies and thrift institutions should check ``Other Financial Institution.'' If the Large Trader is engaged in more than one type of business, check each type that applies to the Large Trader. The types of businesses checked should reflect the businesses of other large traders whose accounts are aggregated into the Form 13H by the Large Trader. For example, if the aggregated accounts of the Large Trader are accounts owned by other persons but controlled by the Large Trader only as an investment adviser, check only ``Investment Adviser,'' even though the Large Trader may be a division, subsidiary, or affiliate of a broker-dealer that has independently filed Form 13H. Item 2. SEC Registrations. Indicate whether the Large Trader is an issuer of securities under the Securities Act of 1933, or registered under the Securities Exchange Act of 1934, the Investment Company Act of 1940, the Investment Advisers Act of 1940, or otherwise is required to file or report information to the Commission that is substantially similar to the information required in the Schedules to Item 4 (e.g., name, location and nature of the business of individual owners, partners, executive officers, directors, and trustees of the Large Trader). If ``Yes'' is checked, provide the applicable types of registrations and SEC or Central Registration Depository (``CRD'') file numbers. The types of registrations or filings listed should reflect the registrations of other large traders and persons whose accounts are aggregated into the Form 13H of the Large Trader. Therefore, if all of the persons whose accounts are aggregated into the Form 13H are covered by one of the listed registrations or filings, then the Large Trader is not required to complete Item 4 or any of the corresponding Schedules. However, if any person whose accounts are aggregated into the Form 13H of the Large Trader is not covered by one of the listed registrations or filings, then the Large Trader is required to complete Item 4 and the corresponding Schedule for the ``un-registered'' person. SEC file numbers may be obtained by calling the commission's public reference room and CRD number may be obtained by calling the member services office of the National Association of Securities Dealers (NASD), during normal business hours. Item 3. CFTC Registrations. Indicate whether the Large Trader is registered with the Commodity Futures Trading Commission (CFTC) as a ``Reporting Trader'' pursuant to Sections 4i and 9 of the Commodity Exchange Act of 1974, or otherwise is registered under the Commodity Exchange Act of 1974. If ``Yes'' is checked, specify the number and type of registration. Item 4. Type of Large Trader. If the Large Trader checked ``NO'' in Item 2, then check one of the listed organization types and complete the applicable Schedule. If any other large traders whose accounts are aggregated into the Form 13H of the Large Trader are not covered by one of the registrations or filings listed in Item 2, then check one of the listed organization types and complete the applicable Schedules for these un-registered persons. The Schedules to Item 4 capture information about the following types of un- registered Large Traders whose accounts are aggregated into Form 13H: Schedule 4a. Individuals. Schedule 4b. Joint Tenants or general partners, and in the case of limited partners, each limited partner that is the owner of more than a 10 percent financial interest in the accounts of the Large Trader. Schedule 4c. Executive officers or directors of a corporation, and all trustees for a private or public trust. The Large Trader must provide full names, addresses, and all other information required on these Schedules. Item 5. Aggregation of accounts by the Large Trader. Aggregated Accounts. Indicate in Item 5(a) whether the Large Trader has aggregated accounts of other persons in its Form 13H, which independently would be large traders. If the Large Trader has aggregated the accounts of other persons, list the name of the other person and its relationship to the Large Trader (e.g., division, subsidiary, affiliate, or partner). Disaggregated Accounts. Indicate in Item 5(b) whether other Large Traders that are owned or controlled by or under common ownership or control with the Large Trader have independently filed a Form 13H and been assigned LTIDs. If the Large Trader has not aggregated the accounts of other Large Traders, list the name of each other large trader, its LTID, and its relationship to the Large Trader (e.g., division, subsidiary, affiliate, or partner). If the Large Trader does not know the LTIDs of the other large traders at the time of filing, it must provide all of these numbers in its next Annual Filing. Form 13h--Items 1 Through 5--Must Reflect the Large Trader's Choice for Aggregation or Disaggregation of Accounts of Other Persons and Large Traders. See Special Instructions to Form 13h-- Items 6 Through 8--For Further Instructions Regarding Disaggregation By a Large Trader. C. Instructions for Form 13H--Items 6 Through 8 Lists of Large Trader Accounts. Items 6 through 8 are organized along the three capacities in which a Large Trader may act with respect to a single account (i.e., owner, controller, or custodian). The Schedules correspond to Items 6 through 8 and are organized to capture different combinations of these capacities, based upon the Large Trader's knowledge of information about accounts and the disclosure of ownership to the broker-dealer carrying the account. The Schedules to Items 6 through 8 require a Large Trader to list information about the following types of accounts: Schedule 6a. Accounts that are owned and controlled by the Large Trader, in whole or in part. Schedule 6b. Accounts that are owned but not controlled by the Large Trader, in whole or in part, which are controlled by others. Schedule 7a. Accounts that are not owned but are controlled by the Large Trader, in whole or in part, which are fully disclosed as to ownership. Schedule 7b. Accounts that are not owned but are controlled by the Large Trader, in whole or in part, which are undisclosed as to ownership. Schedule 8. Accounts maintained by the Large Trader as custodian or nominee only, which are undisclosed as to ownership. Depending on a Large Trader's choice for aggregation of accounts, one or more of these schedules must be filed with Form 13H. The schedules attached to Form 13H must reflect the types of accounts that the Large Trader has chosen to aggregate into its Form 13H. Information Required in the Schedules. The Large Trader must provide full names, addresses, and all other information required on Schedules 6a through 8. Large Traders may attach internally produced lists of accounts to the Schedules provided that such lists capture all required information in a format substantially similar to each of the Schedules. If the Large Trader does not know the LTID or DTC ID System number of other Large Traders at the time of filing, it must provide all of such numbers in its next Annual Filing. Qualifications of the Designated Contact Person. The Large Trader is required to designate a contact person for information regarding the accounts listed on each Schedule. The designated contact person must: (i) be a natural person; (ii) be employed by or otherwise affiliated with the Large Trader; (iii) be authorized by the Large Trader to respond to any inquiries or requests from the Commission; (iv) have personal knowledge of all orders and transactions in the accounts listed on the Schedule or be in a position to obtain this information promptly from other persons who have such personal knowledge; and (v) have the authority to provide prompt assistance with the disaggregation of the listed accounts. Disaggregation of Aggregated and Undisclosed Accounts. In the event that the Commission requests, all broker-dealers or large traders that carry or maintain aggregated or undisclosed accounts may be required to assist in the disaggregation of transactions or accounts. The Commission may request disaggregation in any reasonable manner considering the operational capabilities of each broker-dealer or large trader. For example, the Commission may require the Large Trader to disaggregate accounts or transactions of the other persons and Large Traders listed in Form 13H--Item 5(a). The Commission also may require the Large Trader to disaggregate accounts or transactions of the other Large Traders listed in Schedules 7b and 8. All Large Traders That Control or Maintain Omnibus or Otherwise Undisclosed Accounts Have a Duty to Supervise These Accounts to Assure that Persons Effecting Transactions Through These accounts Comply with the Identification Requirements of Rule 13h-1 and to Assure That the Information Contained in Schedules 7b AND 8 is Accurate and Complete. [FR Doc. 94-3427 Filed 2-16-94; 8:45 am] BILLING CODE 8010-01-P