17 CFR Part 249 

[Release NO. 34-21539; File No.sp-41 

Requests for Confidential Treatment 

Filed by Institutional Investment 

Managers 

AGENCY: Securities and Exchange 

Commission. 


ACTION: Proposed Amendments to 


Instruction to Form. 


suuurav: The Commission is proposing 


for public comment amendments to the 


instructions to the form that prescnies 


the reporting requirements for 


institutional investment managers 


exercising investment discretion over 


accounts having in the aggregate more 
 than $100,000,0a0in exchange-traded or 


NASDAQ-quoted equity securities. The 


amendments woutd simplify the 


procedures for requesting confidential 


treatment of certain risk arbitrage 


positions filed on the form. and pIace 


time limitations on confidential 


treatment requests for securities 


holdings whe-re the holdings constitute 


confidential commercial information. 


DATE: bmments ahould be received on 

or before January 14,1985. 

ADDRESS: Comments should be 

submitted in triplicate to Shirley E. 

Hollis, Acting Secretary, Securities and 

Exchange Commission, 450 Fifth Sheet. 

NW., Washington. D.C. W9. Comment 

letters should refer to Fire No. S740-84. 

All comments received will be availabIe 

for public inspection and copying in the 

Commission's Public Reference Room, 

450 Fifth Street, NW.. Washington, D.C. 

20549. 

FOR FURTHER IMFOAMATIOW CONTACT: 

Fpr questions relating specificaIly to the 

abject of this release, contact Susan P. 

Ffart, Esq., AttorneylAdviser, Office of 

Disclosure Policy and Adviser 

Regulation, (202) 272-2098, Division of 

Investment Maiiqement, Securities and 

NW., Washington. D.C. 20549: for 

questions relating generally to reporting 

requirements far institutional 

investment managers under section 13[f) 

of the Securities Exchange Act of 1934 

and rules thereunder, contact Aiice R. 

Latimer, Research Assistant, Office of 

Chief Counsel, (202) 272-2038, Division 

of Investment Management, Securities 

and Exchange Commission, 450 Fifth 

Street, NW., Washington, D.C. 20549. 

SUPPLEUENTARV INFORMATION: On June 

15,1978, the Securities and Exchange 

Commission (the "Commission"] 

announced the adoption of rule 13f-1(17 

CFR 240.13f-1) and related Form 13F (17 

CFR 249.325), under section 13(fl of the 

Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq. as amended by Pub. L 

No. 94-29 (June 4.1975)) (the "change 

Act").' Under Section 13(f) and rule 13f1, as amended effective February 5, 

1979,' an institutional investment 

manager exercising investment 

discretion (as defined in section 3(a)(35) 

of the Exchange Act (15 U.S.C. 

78(c)(a)(35))) with respect to accounts 

having $100,000,000 or more in 

exchange-traded or NASDAQ-quoted 

equity securities on the last trading day 

of any of the twelve months of calendar 

year must file five copies of Form 13F 

with the Commission and, if a bank, 

with the appropriate bank regulatory 

agency. The form must be filed within 45 

days after the last day of such calendar 

year and within 45 days after the Iast 

day of the first three calendar quarters 

of the succeeding year. The form 

requires the reporting manager to state 

the name of the issuer and the class of 

security, CUSP number, number of 

shares or principal amount in the case of 

convertible debt, and aggregate fair 

market value of each security held. The 

form also requires information 

concerning the nature of investment 

discretion and voting authority 

possessed by the reporting manager. 

Rule 13f-1 and Form 13F were adopted to implement the institutional 

disclosure program mandated by 

Congress in section 13(f) of the 

Exchange Act. In general, section 

13[f)(3) of the Exchange Act requires 

that the Commission make the 

information in reports on Form 13F 

' Exchange Act Relesae No. 14852(JuneIS. 1978) 143 
 %,,,,.,, zz 197el

. hchange ~~l~~~~ N~. 15461 5.

Exchange Commission. 450.Fifth Street, 1979)144 FR 3033.Ianuary 15.1979]. 

promptly available to the public. 

However, that section also provides for 

confidential treatment for two 

categories of information that for 

convenience are referred to in this 

release as "commercial" and "personal." 

If the criteria of section 13(f)(3) are met, 

the Commission's grant of confidential 

treatment to personal information is 

nondiscretionary. Decisions about 

whether to grant confidential treatment 

to commercial information must be 

made in accordance with the Freedom 

of Information Act ("FOW') (5 U.S.C. 

552). 

General Instruction D of Form 13F 

establishes the procedures to be 

followed in requesting confidential 

treatment. As last amended, in 1979, 

General Instruction D provides that if a 

request for confidential treatment is 

based on a claim that the required 

information is commercial or financial. 

the reporting manager must, among 

other things: (1) Describe the investment 

strategy being followed: (2) demonstrate 

that disclosure of the investment 

strategy would be premature; and (3) 

demonstrate that failure to grant the 

request for confidential treatment would 

be likely to cause substantial harm to 

the manager's competitive position. 

The Commission is proposing an 

amendment to General Instruction D to 

Form 13F to provide a simplified 

procedure for requesting wnfidentitll 

treatment of certain arbitrage 

information filed on the form. Under the 

revised procedures, confidential 

treatment would be manted for a period 

of one year to securiiy holdings which 

are open risk arbitrage positions if the 

reporting manager represents in writing 

at the time Form 13F is filed that: (1) The 

security holding represents a risk 

arbitrage position that is open on the 

last day of the calendar quarter for 

which the report is filed; md [2) the 

manager has no present intention to 

close the position on or before the date 

on which the report is required to be 

filed with the Commission. In addition, 

the Comrnissioll is proposing an 

amendment to require managers 

requesting confidential treatment 

requests for commercial information. 

other than open risk arbitrage 

information, to limit their requesta to a 

period of one year or less. 
Background 

Many of the requests for confidential 

treatment of commercial informatiop -

have been from managers who engage in 

risk arbitrage. Based on its experience 

with these requests, the Commission 

believes that it should consider whether 

decisions relating to confidential 

treatment of information about open risk 

arbitrage positions can be made without 

all of the infonnation currently required 

by Instruction D. Since the potential 

hann of public disclosure of such 

positions ia identifiable and similar for 

all open risk arbitrage pdtione ae a 

class (for example, if a merger which 

was the subject of risk arbitrage activity 

was not cansumrnated, an arbitrageur 

could be harmed wben it attempted to 

liquidate its position in adverse market 

conditions. if the extent of ite position 

were known to the public). the. 

Commission ie proposing to eliminate 

the requirement that managers supply 

full factual support on a holdips-byholding basis, and to grant confidential 

treatment for such security positions if 

certain re~resentationsare made in 

writing by thereporting manager. 

Commercial information may, however. 

be granted confidential treaknt only 

in accordance withthe FOlk andthe 

Commission requeeta comment on the 

extent to which it may grant confidential 

treatment to a class of holdings such as 

open risk arbitrage positions. 

Amendments 

Confidential khnent for Open Risk 

Arbi- Mtdons 

The first of the proposed amendments 

to General Instructions D, contained in 

paragraph aflof the revised instruction, 

would require mrs requesting for 

confidential treatment far certain risk 

arbitrage positions to provide two good 

faith representations. Thefirst of these 

is that the security holding represents a 

risk arbitrage position that is open on 

the last day of the calendar quarter for 

which the repart isfiled and the second 

is that the reporting manager has no 

present intention* close the position on 

or before the date the repart is required 

to be filed with the Cammission Under 

: the proposed amendment. if such 

representations are made, confidential 

treatment will be granted automatically 

for a period of one year from the 

calendar quarter end.s 

"Inncoordonca&mleZ(l7CWrntlb 

2), this grant dconfidential Wattnmt would MI 

prectude reconslderation by the Commission qt a later dated thedeciaion concuningconfidential 

treatment. If tbeCcanmiaionwere lareceive a 

POIAmquastiorevCainlorme(ioe~(be~-

year pgfiod. managen would bereqnind to &da 

a. Definition of Risk Arbitmge. For 

purposes of the revisions to lnstruction 

D, the tenn "risk arbitrage" refera to the 

risking of capital in connection with a 

proposed merger, acquisition tender 

offer, or similar transaction involving 

recapitalization ("risk arbitrage event" 

or "deal").4 The tenn applies only to 

transactions effected after the public 

announcement of the deal and before 

completion mtermination of the deal. 

The term also eppk whether the deal 

involves a propoeed exchange of 

securities or cash tender offer and 

whether transectiona are effected witb a 

view to profiting from the consummation 

of the ded or from its unsuccessEul 

termination. The new procedures also 

are available where there isan 

anticipated pmgram to liquidate a risk 

arbitmge position before completion or 

after termination of the deal or within a 

reasonable period of time thereafter.K 

Some institutional managers have 

esgerted in connection with confidential 

treatment requests under section 13(0 

that there is a substantial likelihood of 

competitive henn if open risk arbitrage 

positions are prematurely disclosed to 

the public. The following argument is 

representative of their assertions. A risk 

arbitrageur who has reason to believe 

that an announced merger or tender 

offer may not occur or will occur only 

after protracted delays, most likely will 

want to liquidate its position as . unobstrusively and rapidly as possible. 

If the extent of the arbitrageur's position 

as disclosed on Form 13F ie publicly 

known, the price at which the position 

can be disposed of could be affected 

adversely. Thus, the arbitrageur could 

suffer significant harm if the position 

held became public knowledge before 

the holdings were liquidated. This 

proposed revision to General Instruction 

D is based on a belief that the potential 

for harm horn disclosure is similar for 

all open risk arbitrage positions. 

b. Duration of Confidential Trwtment 

for OpenRisk Arbitrage Positions. Once 

a manager has met the new criteria for 

requesting confidential treatment, the 

information concerning open risk 

arbitrage positions will be protected 

full-factualsupport to justify the continuation of 

confidential treatmed 

*This defiiition of "risk arbitrage" is the same aa 

that referred to in section ll(eHlJ(D)of the 

Exchaqe Act [IS U.S.C 7B(k)(aHl)(D)].Sae 

Ewchange Act Releare No. 15533 (January29.19793 

for a more detailed discussion of the defiiition 

"Deal"is the term commonly used in the industry to 

refer to a risk arbitrage event: therefore. the term 

"deer' is used in this retease to refer to such a 

transaction, 

'Risk arbitrage in this arrlext doea wt fncludc e 

position asauned by a risk ubitrageuruhicb ia 

maintained for tax or iaveslment purposes after tlu 

termination or completion of the deal 

from disclosure for a period of one y

from the date the report is required 

filed, a period during which all open 

positions are likely to be closed, or, 

still open. to become no longer time

sensitive. Any request for an extens

of the period for which confidential 

treatment has been granted under th

new procedures would have to be m

in the form of a new request filed wi

the Commission at least fourteen da

before the end of the initial one-yea

period Moreover. thenew request 

would have to include the full factua

support specified in General Instruc

D Z(aHd) to Form 13F.Because both 

section 13(f)of theExchange Act an

the FOIA were intended by Congres

promote public disclosure of infonna

and because there can be significan

variations in the amount of time tha

risk arbitrage pitione are held ope

the Commission requests comments 

the appropriateness of one year as t

initial period for which confidential 

treatment will be granted under the 

proposed amendment. 

c. Applicability. The simplified 

procedures for requesting confidenti

treatment set out in paragraph 2(f) o

amended instruction would apply on

to open risk arbitrage positions. 

Managers requesting confidential 

treatment for other investment strat

such as block positioning and progr

of acquisition and/or disposition tha

cannot appropriately be considered 

arbitrage would still be required to 

provide full factual support for the 

requests. Block positions have not b

included in the proposal because the

involve transactions which are 

completed during a very short perio

time.. In the Commission's view, eve

a reporting manager held a block 

position at the calendar quarter end

likely that the position would be 

disposed of by the date on which Fo

13F is required to be filed (e.g., 45 da

later). Any block position that might 

maintained 45 days after the close o

calendar quarter wpuld be presumed 

be maintained for investmant purpo

rather than as a block position, and 

would require the full factual suppo

specified in lnstruction D. Similarly

confidential treatment requests 

re'garding acquisition or disposition 

programs, other than risk arbitrage, 

would have to be supported with fa

as specified in paragraph aa)-(d) of 

Rule 3b-8[cJ of the Edsnge Act (17 CFR 

240.3b-8[c)) defines e Mock poritioner as e de

who, amMg ofherthings actiq aa principal. b

short or sells long a block of stock with a mar

value of $200.000 or more in a single kensactio

sells the stock w rapidly as porsibleammen

with the circumstances. 

SEC DOCKET/ 
Instruction D, and a showing of a 

likelihood of competitive harm if the 

positions are disclosed, 

Lin~itationon Confidential Treotnlerlt 

for Other Commercial Informafion 

The second amendment to General 

Instruction D. contained in paragraph 

2(e] of the revised instruction, would 

require each institutional manager 

requesting confidential treatment for 

commercial information, other than 

information relating to an open risk 

arbitrage position, to limit the requested 

period of confidentiality to a specific 

time, not to exceed one year. In the 

Commission's view, this change 

balances the public disclosure concerns 

of the statute with the needs of 

managers to protect certain investment 

strategies and holdings from public 

disclosure under the standards of FOIA 

exemption four. The Commission 

believes that, in most cases, an 

investment strategy or holding that was 

the subject of a confidential treatment 

request under section 13(fJwould within 

a year following the date that the 13F 

report is filed become no longer 

sensitive. Thus, the proposed 

amendment would require managers to 

designate a period of time for which 

confidential treatment of any 

commercial information, other than that 

relating to open risk arbitrage positions, 

is requested. The period requested may 

not exceed one year from the date the 

report is required to be filed with the 

Commission. Requests for extension of 

the period for which confidential 

treatment had been granted could be 

made by submitting a de novo request at 

least fourteen days in advance of the 

expiration of the original time period for 

which confidential treatment was 

granted. The Commission requests 

specific comment on whether it should 

limit confidential treatment requests for 

commercial information, other than open 

risk arbitrage information, to a specific 

time period, and if so, whether a one 

year time period is a reasonable time 

limit for such requests. 

If the proposed amendments to 

Instruction D are adopted substantially 

as proposed. the Commission will 

automatically make public security 

holdings, for which confidential 

treatment has been granted, on the 

specified date without additional notice 

to managers, unless a new request for 

confidential treatment is filed at least 

fourteen days in advance of the 

expiration of the year specified for open 

risk arbitrage positions or, for other 

commercial information, at least 

fourteen days in advance of the time 

designated by the manager. 

List of Subjects in 17 CFR Part 249 

-Reporting requirements, Securities. 

Text of Proposed Amendment to 

General Instructions to Form 13F 

Chapter I1 of Title 17 of the Code of 

Federal Regulations is proposed to be 

amended as follows: 

PART 249-GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

1.By revising paragraph 2 of General 

Instruction D of the form prescribed in 

§ 249.325 of Title 17 of the Code of 

Federal Regulations to read as follows: 

6 249.325 Form 13F. report of Instltutlonal 

investment manager.pu&uant to section 

131f)of the Securities Exchange Act of 

1934. -

.... 

General Instructions ..... 

D.' '' 

2. If a request for confidential treatment is 

based upon a claim that the subject 

information is confidential commercial or financial information.orovide information 

required by (a)-(e)except that if 

the subiect information concerns securitv 

holdingb which represent open risk arbit-rage 

positions and no previous requests for 

confidential treatment of those holdings have 

been made, only the information required in 

paragraph (f] need be provided. a. Describe the investment strategy being 

followed with respect to the relevant 

securities holdings, including the extent of 

any program of acquisition and disposition 

(note that the term "investment strategy." as used in this instruction, also includes 

activities such as block positioning): 

b. Explain why public disclosure of the 

securities holdings would. in fact, be likely to 

reveal the investment strategy; consider this 

matter in light of the specific reporting 

requirements of Form 13F (e.g.. securities 

holdings are reported only quarterly and may 

be aggregated in many cases); c. Demonstrate that such revelation of an investment strategy would be premature: 

indicate whether the manager was engaged in a program of acquisition or disposition of the 

security both at the end of the quarter and at 

the time of the filing; address whether the 

existence of such a program may otherwise 

be known to the public; 

d. Demonstrate that failure to grant the 

request for confidential treatment would be 

likely to cause substantial harm to the 

manager's competitive position: show what use competitors could make of the 

information and how harm to the manager 

could ensue. e. State the period of time period for which 

confidential treatment of the securities 

holdings is requested. The time period 

specified may not exceed of one year from 

the date the report is required to be filed with 

the Commission. 

f. For security holdings wh~chrepresent 

open risk arbitrage positions, the request 

must include good faith representations that: 

(I)The security holding represents a risk 

arbitrage position open on the last day of 

calendar quarter for which the report is filed: 

and 

(2) The reporting manager has no present 

intention to close the position on or before 

the date the report is required to be filed with 

the Commission. 

if the represen!ations stated above are made 

in writing at the time Form 13F is filed, the 

subject security holdings will automatically 

be accorded confidential treatment for a period of one year from the date the report is 

required to be filed with the Commission. 

g. At the expiration of the period for which 

confidential treatment has been granted 

pursuant to item (e)or item (f) of this 

paragraph ("expiration date"), the 

Commission. without additional notice to the 

reporting manager, will make such security 

holdinns oublic unless a de novo request for 

confideniial treatment of the information that 

meets the reauirements of items la)-[el .... of this

paragraph. id filed with the Commission at 

least fourteen (14) days in advance of the 

expiration date. 

Statutory Authority 

The Commission hereby proposes this 

amendment to Form 13F pursuant to the 

authority set forth in section 3(b), 13(fl 

and 23 of the Exchange Act (15 U.S.C. 

78c(b), 78m(f), and 78(w). 

Regulatory Flexibility Act Certification 

Pursuant to Section 605(b) of the 

Regulatory Flexibility Act, the Chairman 

of the Commission has certified that the 

amendments to General Instruction D of 

Form 13Fproposed herein will not, if 

promulgated, have a significant impact 

on a substantial number of small 

entities. These amendments are being 

proposed under Section 13(fl of the 

Exchange Act. The Commission has 

defined small entities for the purposes of 

rulemaking under the Exchange Act; 

however, no specific definition is 

provided for institutional investment 

managers, the class of persons required 

to report pursuant to Section 13(f). 

Moreover, although a definition is 

provided for investment advisers. 

However, the Commission has defined 

small entities when that term is used in 

connection with the Investment 

Advisers Act ("Advisers Act"), in Rule 

0-7 under the Act (17 CFR 249.0-7). 

The term small entities is defined, 

under the Exchange Act, in Rule 0-10 (17 

CFR 240.M). Although this definition 

does not include investment advisers. 

Rule 0-10 provides that the Commission 

may adopt a definition of small entities 

for purposes of a particular rulemaking 

proceeding. For purposes of the 

proposed amendments to Instruction D 

of Form 13Fthe Commission has 

SEC DOCKET/ 1446 
decided to use two definitions of the 

term small entities that were adopted 

previously by the Commission. The 

Commission believes that this action is 

necessary and appropriate to ensure 

that all persons or entities that might be 

institutional investment managers under 

section 13(f) of the Exchange Act will be 

included within a category addressed by 

the definition. The two definitions being 

used are those in Rule 0-10 under the 

Exchange Act and in Rule 0-7 under the 

Advisers Act. Public comment is invited 

on the Commission's use of this 

combined definition. Unles* significant 

public comment is received presenting 

facts that indicate that the definition is 

not appropriate, the Commission does 

not propose to issue any further 

certification under the Regulatory 

Flexibility Act regarding adoption of the 

amendments proposed in this release. 

The definition under the Advisers Act 

provides that an investment adviser is a 

small entity if it manages assets with 

total value of $50 million or less, in 

discretionary or nondiscretionary 

accounts. Aa relevant to the proposed 

amendments to Form 13F, the definition 

under the Exchange Act provides that: a 

broker or dealer Is a small entity if on 

certain specified dates during the prior 

fiscal year it had total capital of less 

than W,000 and it was not affiliated 

with any person that was not a small 

businese organization as defined in Rule 

MO (17 CFR 240.&10(c)). The 

Commission is using the definition under 

the Advisers Ad for all institutional 

investment managers that are not 

brokers or dealers. In the Commission's 

view, this is appropriate because 

functionally the activities of such 

managers most closely approximate 

those of investment advisers. The 

reason for the certification is that there 

are not a substantial number of 

institutional investment managers 

affected by the rule that come within the 

elements of this combined definition of 

small entities. First, the amendment 

would,affect institutional investment 

managers who have at least $100 million 

under management. Thus, any 

investment adviser or other entity 

required to file 13F reports would not be 

a small entity under the Advisers Act 

definition of the term. In addition, the 

Commission does not believe that there 

are a significant number of brokers or 

dealers required to file on Form 13F that 

meet the definition of small entity in rule 

0-10(c) under the Exchange Act. 

Dnled: December 5,1984. 

Shirley E. Hollis, 

Acting Secretary. 

Resulatary Flexibity Act Cmtifhtian 

I. John S.R. Shad Chairman of the 

Securities and Exchange Commission hereby certify pureuant to 5 U.S.C. 605(b) that the 

propoeed amendments to General Instruction 

D to Form 13F (17 CFR 249.325) under rection 

13fn of the Securities Exchanne Act of 1934 

("~ichange Act") (15 U.S.C. f~m(f))set forth 

in Securities Exchanne Act Release No. 21539, 

if promulgated, will iot have a significant 

economic Impact on a substantial number of 

small entities. For the purposes of this 

rulemaking, pureuant to Rule 240.&10 the 

Commission is using a definition af small 

entities which is a wmbinaiton of two 

definitions of that term previously adopted by the Commi.ssion under the Exchange Act and 

under the Investment Adviwm Act of 1940 

(15 U.S.C. 80b-1 et seq.) ("Adviwra Act"). As 

to entities that meet the definition of an 

investment adviser in section 20aa)(11) of the 

Investment Advieem Act of 1940, and all 

institutional investment managers other than 

brokers and dealer* the definition of small 

entities used ia that in Rule S-7 under the 

Advisers Act (17 CFR 275.0-7). As to any 

broker or dealer required to file Form 13F. the 

term small entities is defined in Rule &I0 

under the Exchange Act (17 CFR 240.GlO). 

The Commission is adopting this definition 

because not all institutional inveshnent 

managem required to file Form l3F would be 

included in a category eddreesed by either of 

the definitions cited if only one of the 

definitions were used. However. all 

institutional managers are included within a 

catewrv addreed bv the combined 

defiiition. The ream; for this certification is 

that it doea not appear that a substantial 

number of institutional investment managera affected by the rule that come with the 

definition of "small entities" as set forth in 

Rule 2AO.&lO and Rule W5.&7. 

Dated: December 5.1981. 

John S.R. Shad, 

Chairman. 

/FRDoc.-2381 Flkd lIbl1-W €Miam1 

lllllllYICODL m104ly 

SEC DOCKET/ 14