Securities and Exchange Commission: Disclosure of Short Sales and Short Positions by Institutional Investment Managers
Highlights
GAO reviewed the Securities and Exchange Commission's (SEC) new rule on disclosure of short sales and short positions by institutional investment managers. GAO found that (1) the rule adopts Exchange Act Rule 10a3T which requires institutional investment managers that exercise investment discretion with respect to accounts holding section 13(f) securities having an aggregate fair market value of at least $100 million to file Form SH with the Commission following a calendar week in which it effected a short sale in a section 13(f) security, with some exceptions; and (2) SEC complied with applicable requirements in promulgating the rule.
Securities and Exchange Commission: Disclosure of Short Sales and Short Positions by Institutional Investment Managers, GAO-09-137R, October 28, 2008
The Honorable Christopher J. Dodd
Chairman
The Honorable Richard C. Shelby
Ranking Minority Member
Committee on Banking, Housing, and Urban Affairs
The Honorable Barney Frank
Chairman
The Honorable Spencer Bachus
Ranking Minority Member
Committee on Financial Services
House of Representatives
Subject: Securities and Exchange Commission: Disclosure of Short Sales and Short Positions by Institutional Investment Managers
Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Securities and Exchange Commission (Commission), entitled Disclosure of Short Sales and Short Positions by Institutional Investment Managers (RIN: 3235-AK23). We received the rule on
The interim final temporary rule adopts Exchange Act Rule 10a-3T which requires institutional investment mangers that exercise investment discretion with respect to accounts holding section 13(f) securities having an aggregate fair market value of at least $100 million to file Form SH with the Commission following a calendar week in which it effected a short sale in a section 13(f) security, with some exceptions. The interim final temporary rule became effective on
Enclosed is our assessment of the Commission's compliance with the procedural steps required by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. Our review indicates that the Commission complied with the applicable requirements.
If you have any questions about this report or wish to contact GAO officials responsible for the evaluation work relating to the subject matter of the rule, please contact Michael R. Volpe, Assistant General Counsel, at (202) 512-8236.
signed
Robert J. Cramer
Associate General Counsel
Enclosure
cc: Florence E. Harmon
Acting Secretary
Securities and Exchange Commission
ENCLOSURE
REPORT UNDER 5 U.S.C. sect. 801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
SECURITIES AND EXCHANGE COMMISSION
ENTITLED
"DISCLOSURE OF SHORT SALES AND SHORT POSITIONS
BY INSTITUTIONAL INVESTMENT MANAGERS"
(RIN: 3235-AK23)
(i) Cost-benefit analysis
The Securities and Exchange Commission (Commission) prepared a cost-benefit analysis in conjunction with the interim final temporary rule. The Commission expects that Rule 10a-3T and Form SH will help restore investor confidence in the markets and reduce manipulative behavior, which should help to alleviate any undue crisis of investor confidence and may strengthen the market's ability to correctly incorporate accurate information into securities prices. Also, the Form SH disclosure will enable staff to study the impact of short selling on the market in times of financial crisis. The Commission estimates the costs will be $93.5 million in filing costs for the 1,000 Form SH Reports that will be filed with the Commission each week through
(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. sections 603-605, 607, and 609
The Commission certified that the interim final temporary rule will not have a significant impact on a substantial number of small entities, and therefore the Commission did not undertake a Regulatory Flexibility Analysis. In the interim final temporary rule, the Commission solicits comments on the certification and asks that commenters describe the nature of any impact on small entities and prove any empirical data.
(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. sections 1532-1535
The Unfunded Mandates Reform Act of 1995 is inapplicable to the Commission, because it is not an agency for purposes of the Act. 2 U.S.C. sect. 658(1).
(iv) Other relevant information or requirements under acts and executive orders
Administrative Procedure Act, 5 U.S.C. sections 551 et seq.
The Administrative Procedure Act requires an agency to publish a notice of proposed rulemaking in the Federal Register. 5 U.S.C. sect. 553(b). An agency is also required to publish an adopted rule in the Federal Register 30 days before the rule becomes effective. 5 U.S.C. sect. 553(d). An agency may waive these requirements if it finds good cause. The Commission found good cause to have Rule 10a-3T and Form SH effective as temporary interim rules on October 18, 2008, and that notice and public procedure in advance of effectiveness of the rules are impracticable, unnecessary, and contrary to the public interest.
Paperwork Reduction Act, 44 U.S.C. sections 3501-3520
The interim final temporary rule contains a collection of information under the Act titled Form SH (OMB Control No. 3235-0646). The Office of Management and Budget approved Form SH on
Statutory authorization for the rule
The Commission issued the interim final temporary rule pursuant to the authority of sections 3(b), 10, and 23(a) of the Exchange Act, as amended.
Executive Order No. 12,866
The Commission is not subject to Executive Order 12,866 because it is an independent regulatory agency, as defined by 44 U.S.C. sect. 3502(5).
Executive Order No. 13,132 (Federalism)
The Commission is not subject to Executive Order 13,132 because it is an independent regulatory agency, as defined by 44 U.S.C. sect. 3502(5).