The SEC on October 13 adopted new Rule 13f-2 to increase short position reporting to the SEC by institutional investment managers. The vote was 3-2, with Commissioners Peirce and Uyeda opposing the Rule.
The SEC was required by Congress in the Dodd-Frank Act of 2010 to promulgate rules to make certain short sale data publicly available. The SEC published the proposed new Rule 13f-2 in February 2022.
Like the rule proposal, the final rule will require investment managers with large short positions to file a Form SHO report via the Commission’s EDGAR system within 14 days after the end of each calendar month. Reporting would be required for any short position that meets or exceeds a monthly average gross short position of $10 million in dollar value or 2.5% of outstanding shares of an equity security.
Each reporting manager will also be required to provide its “net” activity in the reported equity security, including activity in derivatives, daily within the same calendar month.
These short position filings will be kept confidential by the SEC. Within four weeks of the end of each calendar month, the SEC will aggregate this short position data and publish it for each security reported on Form SHO. The SEC will also publish, on an aggregated basis, the “net” activity in the reported security daily during each calendar month.
The new requirement will add to the short sale information available to issuers in that it will be collected from a broader group of investors, such as hedge funds, investment managers, pension plans, etc., beyond the broker-dealer data that is now collected and disseminated by FINRA. Daily net activity will also be published by the SEC, data not currently available from FINRA or the exchanges. However, as noted, investment manager information will continue to remain confidential.
In this rulemaking, NIRI proposed that individual manager short positions should be disclosed to individual issuers on a confidential basis. This recommendation, unfortunately, was not adopted although NIRI’s comment letter is noted in footnotes 335, 338, and 339 on pages 116-117.
The new rules will become effective 60 days after publication in the Federal Register. The compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date of the adopting release, with public aggregated reporting to follow three months later.
Resources
- Press Release: https://www.sec.gov/news/press-release/2023-221
- Fact Sheet: https://www.sec.gov/files/34-98738-fact-sheet.pdf
- Final Rule: https://www.sec.gov/files/rules/final/2023/34-98738.pdf
About NIRI: The Association for Investor Relations
Founded in 1969, NIRI is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts, and other financial community constituents. NIRI is the largest professional investor relations association in the world with members representing over 1,500 publicly held companies and $12 trillion in stock market capitalization.