55556 Federal Register / Vol. 73, No. 187 / Thursday, September 25, 2008 / Notices 

1 15 U.S.C. 78l(k)(2). 

2See Securities Exchange Act Release No. 58592 

(Sept. 18, 2008). 

Room 10230, New Executive Office 

Building, Washington, DC 20503. 

Charles Mierzwa, 

Clearance Officer. 

[FR Doc. E8–22593 Filed 9–24–08; 8:45 am] 

BILLING CODE 7905–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 58611] 

Securities Exchange Act of 1934 

Amendment to Emergency Order 

Pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934 

Taking Temporary Action To Respond 

to Market Developments 

September 21, 2008. 

Pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934,1 on 

September 18, 2008, the Securities and 

Exchange Commission (‘‘Commission’’) 

issued an Emergency Order (the 

‘‘Order’’) related to short selling the 

publicly traded securities of certain 

financial firms.2 The Order was effective 

immediately. The Commission is 

issuing this amendment to address 

current and anticipated technical and 

operational concerns resulting from the 

requirements of the Order. 

A. Included Financial Firms 

The Order applies to the publicly 

traded securities of certain financial 

firms, which entities are identified in 

Appendix A to the Order (‘‘Included 

Financial Firms’’). We are amending the 

Order to modify the list of Included 

Financial Firms. As we stated in the 

Order, recent market conditions have 

raised concerns that short selling in the 

securities of a wide range of financial 

institutions may be causing sudden and 

excessive fluctuations of the prices of 

such securities in such a manner to 

threaten fair and orderly markets. 

Difficulties with the classification 

criteria led to the omission of financial 

institutions falling within these 

categories. In light of the familiarity of 

the exchanges listing financial 

institutions with the nature of their 

respective businesses, the Commission 

has determined to amend this Order to 

provide that the listing markets shall 

select the individual financial 

institutions with securities covered by 

the Order. The Commission expects 

each national securities exchange listing 

financial institutions to immediately 

publish a list, on its Internet Web site, 

of individual listed companies with 

common equity that will be covered by 

the Order’s prohibition on short sales. 

The Commission expects these lists to 

cover banks, savings associations, 

broker-dealers, investment advisers, and 

insurance companies, whether domestic 

or foreign, and the owners of any of 

these entities. 

To the extent an issuer chooses not to 

be covered by the Order’s prohibition on 

short sales, we have authorized the 

applicable national securities exchange 

to exclude that issuer from its list of 

covered financial firms. 

It is therefore ordered that, pursuant 

to our Section 12(k)(2) powers, the 

Order applies to the publicly traded 

common equity securities of any issuer 

identified by any national securities 

exchange listing such securities as being 

a financial institution (each a ‘‘Covered 

Security’’ and collectively, ‘‘Covered 

Securities’’). 

B. Options and Futures Contract 

Expiration 

The Order includes an exception from 

its requirements to allow short sales that 

occur as a result of automatic exercise 

or assignment of an equity option held 

prior to effectiveness of the Order due 

to expiration of the option. We are 

amending the Order to also allow short 

sales that occur as a result of the 

expiration of futures contracts held 

prior to effectiveness of the Order. 

It is therefore ordered that, pursuant 

to our Section 12(k)(2) powers, the 

requirements of the Order shall not 

apply to any person that effects a short 

sale in any Covered Security as a result 

of automatic exercise or assignment of 

an equity option, or in connection with 

settlement of a futures contract, that is 

held prior to effectiveness of the Order 

due to expiration of the option or 

futures contract. 

C. Options Assignments 

To allow for creation of long call 

options, we are amending the Order to 

except from its requirements, short sales 

that occur as a result of assignment to 

call writers upon exercise. 

It is therefore ordered that, pursuant 

to our Section 12(k)(2) powers, the 

requirements of the Order shall not 

apply to the writer of a call option that 

effects a short sale in any Covered 

Security as a result of assignment 

following exercise by the holder of the 

call. 

D. Market Making and Derivatives 

In the Order we included an 

exception until 11:59 p.m. on 

September 19, 2008 for any person that 

is a market maker that effects a short 

sale as part of bona fide market making 

and hedging activity related directly to 

bona fide market making in derivatives 

on the publicly traded securities of any 

Included Financial Firm. We are 

amending the exception so that it 

continues for the duration of the Order. 

In addition, we are clarifying that the 

exception applies to all market makers, 

including over-the-counter market 

makers, and that it applies to bona fide 

market making and hedging activity 

related directly to bona fide market 

making in exchange traded funds and 

exchange traded notes of which Covered 

Securities are a component. The 

purpose of this accommodation is to 

permit market makers to continue to 

provide liquidity to the markets. 

To help ensure that this hedging 

exception does not result in increased 

short exposure in Covered Securities, 

we are limiting the exception so that if 

a customer or counterparty position in 

a derivative security based on a Covered 

Security is established after 12:01 a.m. 

E.D.T on September 22, 2008, a market 

maker may not effect a short sale in the 

Covered Security if the market maker 

knows that the customer’s or 

counterparty’s transaction will result in 

the customer or counterparty 

establishing or increasing an economic 

net short position (i.e., through actual 

positions, derivatives, or otherwise) in 

the issued share capital of a firm 

covered by this Order. 

It is therefore ordered that, pursuant 

to our Section 12(k)(2) powers, the 

requirements of this Order shall not 

apply to any person that is a market 

maker, including an over-the-counter 

market maker, that effects a short sale as 

part of a bona fide market making and 

hedging activity related directly to bona 

fide market making in (a) derivative 

securities based on Covered Securities, 

or (b) exchange traded funds and 

exchange traded notes of which Covered 

Securities are a component. Provided, 

however, if a customer or counterparty 

position in a derivative security based 

on a Covered Security is established 

after 12:01 a.m. E.D.T on September 22, 

2008, a market maker may not effect a 

short sale in the Covered Security if the 

market maker knows that the customer’s 

or counterparty’s transaction will result 

in the customer or counterparty 

establishing or increasing an economic 

net short position (i.e., through actual 

positions, derivatives, or otherwise) in 

the issued share capital of a firm 

covered by this Order. 

All market makers relying on this 

exception to the limitation on short 

selling shall, as soon as operationally 

practicable, publish a notice on their 

Internet Web site that, pursuant to this 

mstockstill on PROD1PC66 with NOTICES

Federal Register / Vol. 73, No. 187 / Thursday, September 25, 2008 / Notices 55557 

3 17 CFR 230.144. 

1 15 U.S.C. 78 l(k)(2). 

2See Exchange Act Release No. 58591 (September 

18, 2008). 

3See Exchange Act Release No. 58166 (July 15, 

2008), Exchange Act Release No. 58572 (September 

17, 2008). 

4This finding of an ‘‘emergency’’ is solely for 

purposes of Section 12(k)(2) of the Exchange Act 

and is not intended to have any other effect or 

meaning or to confer any right or impose any 

obligation other than set forth in this Order. 

5The term ‘‘investment discretion’’ has the same 

meaning as in Exchange Act Rule 13f–1(b). See 17 

CFR 240.13f–1(b). 

6The term ‘‘section 13(f) securities’’ has the same 

meaning as in Exchange Act Rule 13f–1(c). See 17 

CFR 240.13f–1(c). 

7See Exchange Act Rule 0–2 for a description of 

the business hours of the Commission. 17 CFR 

240.0–2. 

8Although we are requiring managers to 

electronically file Forms SH using our EDGAR 

system, the Forms SH will be filed on a non-public 

basis. The Commission is permitting the non-public 

filing of Form SH in order to maintain fair and 

orderly securities markets and prevent substantial 

disruption in the securities markets. The 

Commission believes that the non-public 

submission of Form SH may help prevent artificial 

volatility in securities as well as further downward 

swings that are caused by short selling, while at the 

same time, providing the Commission with useful 

information to combat market manipulation that 

threatens investors and capital markets. Two weeks 

after the due date for the Forms SH, the 

Commission will make the Forms available to the 

public. We believe that by two weeks after the due 

date the reasons to maintain the information as nonpublic will have diminished. 

9No Commission procedure for seeking 

confidential treatment of information filed with or 

transmitted to the Commission, such as those in 17 

CFR 200.80, 200.83, or 240.24b–2, shall apply to the 

information that this Order requires to be filed. 

Order, the market maker may not 

knowingly effect a short sale as part of 

bona fide market making and hedging 

activity related directly to bona fide 

market making in a derivative security 

based on a Covered Security, if the 

customer’s or counterparty’s transaction 

will result in the customer or 

counterparty establishing or increasing 

an economic net short position (i.e., 

through actual positions, derivatives, or 

otherwise) in the issued share capital of 

a firm covered by the Order. 

E. Sales of Restricted Securities 

We are also amending the Order to 

clarify that the Order does not apply to 

persons that effect sales of Covered 

Securities pursuant to Rule 144 of the 

Securities Act of 1933 (‘‘Rule 144 

Securities’’).3 This accommodation is 

necessary because sales of Rule 144 

Securities are sales of owned securities. 

It is therefore ordered that, pursuant 

to our Section 12(k)(2) powers, the 

Order does not apply to any person that 

effects a sale pursuant to Rule 144 of the 

Securities Act of 1933 (17 CFR 230.144) 

in a Covered Security. 

We believe that these amendments are 

necessary in the public interest and for 

the protection of investors to maintain 

fair and orderly securities markets, and 

to prevent substantial disruption to 

securities markets. 

By the Commission. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–22502 Filed 9–24–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 58591A] 

Securities Exchange Act of 1934; 

Amendment to Emergency Order 

Pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934 

Taking Temporary Action To Respond 

to Market Developments 

September 21, 2008. 

Pursuant to Section 12(k)(2) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’),1 on September 18, 

2008, the Securities and Exchange 

Commission (‘‘Commission’’) issued an 

Emergency Order (‘‘Order’’) requiring 

institutional investment managers to 

report short sales of certain publicly 

traded securities.2 The Order takes 

effect on September 22, 2008 and 

requires the filing of a Form SH on 

September 29, 2008. This amendment 

relates to the public availability of the 

information provided by the 

institutional investment managers when 

they report such sales and also includes 

technical amendments. 

The Commission is aware of the 

continued potential of sudden and 

excessive fluctuations of securities 

prices and disruption in the functioning 

of the securities markets that could 

threaten fair and orderly markets. As 

evidenced by our recent publication of 

emergency orders under Section 12(k) of 

the Exchange Act,3 we are concerned 

about the possible unnecessary or 

artificial price movements based on 

unfounded rumors regarding the 

stability of financial institutions and 

other issuers exacerbated by short 

selling. We also believe that some 

persons may take advantage of issuers 

that have become temporarily weakened 

by current market conditions to engage 

in inappropriate short selling in the 

securities of such issuers. 

Given the importance of confidence in 

our financial markets as a whole, we 

have become concerned about sudden 

and unexplained declines in the prices 

of securities. Such price declines can 

give rise to questions about the 

underlying financial condition of an 

issuer, which in turn can create a crisis 

of confidence without a fundamental 

underlying basis. This crisis of 

confidence can impair the liquidity and 

ultimate viability of an issuer, with 

potentially broad market consequences. 

As a result of these recent 

developments, the Commission 

concluded that there continues to exist 

the potential of sudden and excessive 

fluctuations of securities prices 

generally and disruption in the 

functioning of the securities markets 

that could threaten fair and orderly 

markets. Based on this conclusion, the 

Commission is exercising its powers 

under Section 12(k)(2) of the Exchange 

Act.4 Pursuant to Section 12(k)(2), in 

appropriate circumstances the 

Commission may by order summarily 

take action to alter, supplement, 

suspend, or impose requirements or 

restrictions with respect to matters or 

actions subject to regulation by the 

Commission. 

We have concluded that it is 

necessary to require certain institutional 

investment managers to report 

information concerning daily short sales 

of securities. For purposes of this Order, 

we believe that section 13(f) of the 

Exchange Act and Rule 13f–1 provide 

useful and tested terms and definitions 

that provide a basis for requiring new 

disclosure. The Order therefore requires 

that an institutional investment manager 

that exercises investment discretion 5

with respect to accounts holding section 

13(f) securities 6 having an aggregate fair 

market value on the last trading day of 

any month of any calendar year of at 

least $100,000,000 must file a new form 

with the Commission. Specifically, an 

institutional investment manager who 

has filed or was required to file a Form 

13F for the calendar quarter ended June 

30, 2008 under section 13(f) of the 

Exchange Act and Rule 13f–1(a) 

thereunder will be required to file a 

report on new Form SH with the 

Commission on the first business day 7

of every calendar week immediately 

following a week in which it effected 

short sales. 

The Form SH, which must be filed 

electronically using the Commission’s 

EDGAR system,8 must include 

disclosure of the number and value of 

securities sold short for each section 

13(f) security, except for short sales in 

options, and the opening short position, 

closing short position, largest intraday 

short position, and the time of the 

largest intraday short position, for that 

security during each calendar day of the 

prior week.9 This disclosure 

requirement will apply only to short 

sales effected after the effective date of 

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