Federal Register, Volume 76, Number 149, August 3, 2011, Pages 46595-47054 Page: 46,971

                                
Federal Register/Vol. 76, No. 149 /Wednesday, August 3, 2011 /Rules and Regulations

did not receive any comments regarding
Reactivated Status. The Commission is
adopting this provision, as proposed. In
particular, the provision for reactivated
status is designed to ensure that a large
trader on Inactive Status that becomes
active above the identifying activity
threshold is once again required to file
and update Form 13H and inform its
broker-dealers of the need to record its
trading activity by its LTID.
vi. Termination Filings
Under Rule 13h-1(b)(3)(iii), a person,
under certain narrow circumstances,
may permanently end its large trader
status by submitting a "Termination
Filing." This filing is designed to allow
a large trader to inform the Commission
that it has terminated operations, and
therefore there is no chance of it
requalifying for large trader status in the
future.102 Termination status is
designed to signal to the Commission to
not expect future amended or annual
Form 13H filings from that large trader,
such as when a large trader dissolves,
ceases doing business, or, in some cases,
is acquired, as described below.
The Commission believes it may be
helpful to provide additional examples
to illustrate the narrow circumstances
under which a large trader may file a
"Termination Filing." These examples
also should provide guidance to large
traders on how to amend their Forms
13H when a large trader is involved in
a merger.
* Example 1: A large trader merges
into another large trader, resulting in
only one entity. The non-surviving large
trader would submit a "Termination
Filing" that specifies the effective date
of the merger. The surviving large
trader, in an Amended Filing or its next
Annual Filing (depending on the
effective date of the merger), would
update Item 4 to list the non-surviving
company as an affiliate that files
separately and provide the additional
identifying information required in Item
4. Specifically, in the Description of
Business and Relationship to the Large
Trader fields, the surviving entity would
disclose that the non-surviving entity
has been acquired and no longer exists
as a separate entity. The non-surviving
company's market participation
identification number ("MPID") and
LTID number (including suffix, if any)
should also be listed. Capture of this
information will allow the Commission
to track the control of the non-surviving
entity. In this scenario, the surviving
Status pursuant to paragraph (b)(3) of new Rule
13h-1 must notify broker-dealers promptly after
filing for reactivated status with the Commission.

102 By contrast, as described above, Inactive
Status may be only temporary.

large trader would continue using its
LTID.
* Example 2: An existing large trader
acquires another large trader and the
target is maintained as a separate
subsidiary. Following the acquisition,
the target's trading would need to be
tagged with the acquirer's LTID. The
acquired subsidiary company may file a
Termination Filing so long as all of its
trading is tagged with its new parent's
LTID.103 Alternatively, the acquired
entity may maintain its original LTID
and have its trading tagged with both its
original LTID and its new parent's LTID.
If a Termination Filing is not made, then
both companies would have to amend
Items 4 of their Forms 13H to list the
other as an affiliate and disclose their
affiliate's information, including its
MPID and LTID.
* Example 3: A large trader is
acquired by a company that was not
previously a large trader. The new
parent company is now a "large trader"
due to acquiring control of a large
trader. Accordingly, the acquirer would
file an "Initial" Form 13H and obtain a
new LTID, which would be used to
identify all of its trades and the trades
of its affiliates (including its newly
acquired large trader subsidiary). The
acquired subsidiary company may file a
Termination Filing so long as all of its
trading is tagged with its new parent's
LTID.104 Alternatively, the acquired
entity may maintain its original LTID
and have its trading tagged with both its
original LTID and its new parent's LTID.
If a Termination Filing is not made, then
both companies would have to identify
the other as an affiliate in Items 4 of
their Forms 13H.
The Commission did not receive any
comments regarding Termination
Filings. The Commission is adopting
this provision, as proposed. In
particular, the ability to submit
Termination Filings will allow the
Commission to accurately track only
active large traders and will allow large
traders that cease operation to formally
terminate their filing obligations under
Rule 13h-1.
b. Self-Identification to Broker-Dealers
As proposed, Rule 13h-1(b)(2) would
have required a large trader to disclose
to the registered broker-dealers effecting
transactions on its behalf its LTID and
each account to which it applies.
Second, the provision, as proposed,
would have required a large trader to
103 If a Termination Filing is elected, the acquirer
may wish to use an LTID suffix to separately
identify the acquired entity's trading activity.
1o4 If a Termination Filing is elected, the acquirer

may wish to use an LTID suffix to separately
identify the acquired entity's trading activity.

disclose its LTID to all others with
whom it collectively exercises
investment discretion. The Commission
received comments about the latter
requirement. 105
Proposed Schedule 6 to the Form
would have required a large trader, in
connection with disclosing its brokerage
accounts, to also list the LTID(s) of all
other large traders that exercise
investment discretion over the
particular account. To assure that large
traders had access to other large traders'
LTIDs, the proposed rule would have
required large traders to disclose their
status to one another. One commenter
requested clarification regarding
whether a large trader would be
obligated to identify unaffiliated large
traders only if investment discretion is
exercised collectively.106
As discussed below, the Commission
is not adopting the requirement to
disclose brokerage account numbers on
Form 13H and instead is requiring a
large trader to provide a list of all
registered broker-dealers with whom it
has an account. Consequently, the
requirement to provide the LTID(s) of all
other large traders that exercise
investment discretion over the
particular account now is no longer
relevant and is not being adopted.
Because the requirement to disclose the
information is not being adopted, it
would not be necessary for large traders
to inform others of their LTIDs, and the
Commission is similarly not adopting
the proposed requirement for a large
trader to disclose its LTID to all others
with whom it collectively exercises
investment discretion. Accordingly,
Rule 13h-1(b)(2), as adopted, requires a
large trader to disclose to the registered
broker-dealers effecting transactions on
its behalf its LTID and each account to
which it applies.
Lastly, the requirements that a large
trader provide its LTID to all registered
broker-dealers who effect transactions
on its behalf, and identify each account
to which it applies, are ongoing
responsibilities that must be discharged
promptly. For example, if a subsidiary
of a large trader is acquired by another
large trader, to the extent that subsidiary
effects transactions in NMS securities
equal to or greater than the reporting
activity level, both large traders must
o see, e.g., Wellington Management Letter at 5.
106 See Wellington Management Letter at 5-6.
Another commenter recommended that the
Commission not require investment advisers to
identify other advisers of a client account that trade
separately and without collaboration in a different

custodial account. See Investment Company
Institute Letter at 10.

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