The SEC has granted a pause for Rule 13f-2, which requires that institutional investment managers file nonpublic Form SHO reports that include information on month-end short positions and net daily short sale activity when certain thresholds are exceeded.
The SEC would use that data to compile a report on the status of short-selling in the industry, with the goal of increasing transparency and reducing the potential for market manipulation during periods of volatility.
The Form SHO reports would supplement short-selling reporting already required by self-regulatory organizations such as FINRA.
Rule 13f-2 became effective on January 2, 2024, with the initial form SHO filings originally due on February 14, 2025. The reports are due 14 days after the end of each calendar month.
Now, due to industry pressure, the compliance date has been postponed by almost an entire year, to Feb 17, 2026.
Compliance date concerns
In late January, the Investment Company Institute (ICI) requested no-action relief from the SEC until it could be provided further guidance on how to comply with Rule 13f-2’s reporting requirements.
The ICI stated that the SEC’s lack of formal guidance led to the possibility of inconsistent interpretations of the rule. It also raised the concern that there was insufficient time to implement proper systems to capture required data.
The ICI requested at least a sixth-month exemption from enforcement actions after interpretative guidance was provided. That guidance would address questions such as how to report on convertible bonds, when the rule only allows reporting on short positions in “number of shares.”
The SEC has now granted relief in the form of an industry-wide compliance pause as it engages with industry participants.
SEC Commissioner Mark Uyeda conceded that an important update to Rule 13f-2’s compliance standards was “released only on Dec 16, 2024, immediately prior to the holidays.”
The extension to the compliance date would give firms more time to prepare, as well as conduct technical testing, he stated.
