Following on the SEC's recent emergency orders imposing weekly short sales reporting requirements (which we described in previous client alerts), the SEC on Wednesday this week adopted an "interim final temporary rule" (the "Rule")[1] extending those requirements until August next year and requesting comments on the Rule.[2]  

The Rule changes several of the requirements of the emergency orders.  Some of these changes address, at least in part, some of the observations we have discussed with some of our clients and other market participants.

• Weekly Due Date.  Beginning on October 18, 2008—the effective date of the Rule—the weekly filing deadline for Forms SH will be the last business day of the calendar week following the week being reported, rather than the first business day of the following calendar week.  Accordingly, the next Form SH due date is October 24, 2008, rather than October 20, 2008.
• Data to be Reported.  The value of reportable securities sold short (column 5 of the current Form SH), the largest intraday short position (column 7 of the current Form SH), and the time of day of the largest intraday short position (column 8 of the current Form SH) are no longer to be reported on Form SH.
• Pre-Sept. 22, 2008 Positions.  All short positions, including short positions established before September 22, 2008, are to be included in a filer's start-of-day and end-of-day short positions reported on Form SH.
• De Minimis Exclusion.  The threshold for having to report short sales or positions is now a fair market value of $10 million (rather than a fair market value of $1 million).[3]  That is, a filer may avoid disclosing anything about a short sale of, or a short position in, a security if the value of each of the start-of-day short position, the gross number of shares sold short during the day, and the end-of-day short position was less than $10 million.  If, for any security, a filer has exceeded the $10 million threshold on only some of those Form SH data columns, it need provide data only for those particular columns and may rely on the exclusion for the others.[4]  
• Filing Procedure.  Filers will need to submit the Form SH data to the SEC in XML tagged data format.

Special Procedures for Filings Due on October 24, 2008 or October 31, 2008:  The adopting release provides that, for Form SH filings due on either of these dates, the filer need not:

• Disclose short positions established before September 22, 2008; however, if the filer elects not to disclose those short positions, the applicable de minimis threshold will be $1 million, rather than the $10 million threshold that the Rule permits; or
• File the Form SH data in XML format.  The filer may instead file the Form SH on EDGAR in the same manner as permitted under the emergency orders.

Nonpublic Status.  As under the emergency orders, Forms SH will be nonpublic to the extent permitted by law.[5]  Filers must continue to label Forms SH as nonpublic by adding the phrase NONPUBLIC (in bold and capital letters) at the top and bottom of each page of the Form, other than the XML tagged data file containing the Form's transaction data.

Comments to SEC.  The SEC is seeking comments on the Rule, including comments addressing the burdens of the disclosure requirements.  As mentioned in a prior alert, we are considering submitting a comment letter and invite you to contact any of us to discuss your thoughts, views, and concerns about the disclosure requirements.

[1] The Rule is Rule 10a-3T under the Securities Exchange Act of 1934, as amended.

[2] The Rule and the adopting release accompanying it contain more detail about the filing requirements than did the emergency orders.  But there are still likely to be interpretive questions.

[5] The adopting release cites certain exemptions under the Freedom of Information Act as permitting the SEC to withhold from the public information contained in Forms SH.  The release does not, however, delve into any analysis regarding the scope of those exemptions or their applicability to Forms SH.