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Frequently Asked Questions Relating to Treasury's Large Position Recordkeeping and Reporting Rules - SECTION 420.4 - RECORDKEEPING

4.1) When does a reporting entity become subject to the large position recordkeeping requirements?

Whenever a reporting entity controls a position of $2 billion or more in a Treasury security it becomes immediately subject to the full range of large position recordkeeping rules.

4.2) Would a reporting entity that is subject to the large position rules fall out of the recordkeeping requirements if it did not control a position equal to or greater than the minimum large position threshold ($2 billion) for an extended period (e.g., one year)?

No, once a reporting entity becomes subject to the large position recordkeeping rules, it must continue to make and maintain the required records even if it did not reach the $2 billion large position threshold for an extended period of time.

4.3) If funds, investment companies, or other entities are aggregated within a reporting entity, and such reporting entity is subject to the recordkeeping requirements of the rules, must the funds, investment companies, or other entities follow the recordkeeping rules also?

If the funds, investment companies, or other entities do not have investment discretion (e.g., if the authority to make and execute decisions regarding buying, selling, or retaining securities resides with another entity, such as their investment adviser), they are not deemed to have control of securities under the large position rules. In such cases, it is the responsibility of the entity that has control of the securities (i.e., the reporting entity), not such aggregating entities, to adhere to the recordkeeping requirements of the rules. The reporting entity's records must include information concerning all securities for which it exercises investment discretion, including the securities owned by other entities.

4.4) An entity (such as a hedge fund, pension fund, or insurance company) is not subject to federal securities recordkeeping rules but is required to follow the recordkeeping requirements of the large position rules (section 420.4(c)). Is it permissible for such an entity to have a third party make and maintain its records, including making and maintaining the records at another location?

Yes, such an entity may have its records made by, and kept at, a third party, including a third party that makes and maintains the records at another location (e.g., the offices of an entity's prime or clearing broker-dealer). However, the entity that is subject to the recordkeeping rules, not the third party that has been contracted to make and maintain the records, remains responsible for compliance with such rules.

4.5) Regarding the requirement to retain large position records for either 3 or 6 years, depending on the type of record, does the time frame apply from the date Treasury requests a large position report?

No, the records retention or preservation requirements in sections 420.4(b) and (c) apply from the date that a transaction is effected and the related records are created, not from the date that Treasury requests large position reports for a specific security.

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