SEC to tag ‘large traders’

A new rule designed to identify and monitor “large traders” went into effect this week, subjecting certain private equity firms to new reporting requirements.

Rule 13h–1 under the US Securities Exchange Act requires any person or firm trading public securities worth more than $20 million during any calendar day, or 20 million shares or $200 million during any calendar month, to identify itself to the SEC.

Large traders will be required to make certain disclosures under Form 13H and be issued an identification number used to track their transactions.

While private equity firms do not typically deal in public securities, the rule captures trades made at the portfolio company level, warned a client memo from law firm Ropes & Gray. Also, large transactions in publicly-traded securities can occur when making a block trade after listing a portfolio company, added Ropes.

Form 13H filings are due by this December. No specific penalties for violating the rule were laid out by the SEC but failing to comply could result in enforcement action, said Ropes.