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Vedder Thinking | Articles SEC Proposes Short Sale Data Reporting by Institutional Investment Managers

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On February 25, 2022, the SEC proposed a new rule and form requiring certain institutional investment managers to file confidential monthly reports with the SEC regarding short sale data. As proposed, the SEC would then publish certain aggregate information on large short positions related to individual equity securities and net activity during the applicable month. This information is intended to supplement the current short sale transaction information provided by major U.S. stock exchanges and FINRA.

Specifically, proposed Rule 13f-2 under the Securities Exchange Act would require institutional investment managers to file new Form SHO with the SEC confidentially, within 14 calendar days after the end of each calendar month, with regard to each equity security and all accounts over which the manager meets or exceeds one of the thresholds described below. The specific threshold would depend on whether the short position relates to an equity security of a reporting or non-reporting entity (i.e., whether the issuer is required to file reports pursuant to the

Exchange Act), as follows:

  • With respect to an equity security of a reporting issuer, a manager would file Form SHO to report each “gross short position” over which it and any person under the manager’s control has investment discretion collectively that (1) has a value of at least $10 million at the close of any settlement date during the calendar month, or (2) represents a monthly average gross short position as a percentage of shares outstanding in the equity security of at least 2.5%.
  • For an equity security of a non-reporting issuer, disclosure would be required of each short position with a value that meets or exceeds $500,000 at the close of any settlement date during the month.

The information an institutional investment manager would
report would include:

  • the name of the eligible security;
  • end of month gross short position information; and
  • daily trading activity that affects a manager’s reported gross short position for each settlement date during the calendar month reporting period.

A manager would need to determine whether it has a Form SHO filing requirement on a month-by-month basis.

As proposed, one month after the end of each calendar month, the SEC would publish the following aggregate short position information regarding each individual equity security reported by managers on Form SHO:

  • the aggregate gross position as of the calendar month’s last settlement date;
  • the aggregate gross short position’s dollar value;
  • a summary of the managers’ reported hedging information with respect to the reported equity security;
  • the percentage of the aggregate gross short position for a reported equity security that is reported as being fully hedged, partially hedged or not hedged; and
  • the “net” activity in the reported equity security for each individual settlement date during the calendar month.

Comments on the proposal are due by April 26, 2022.

The SEC’s proposing release is available here.



Professionals



Rachel Behar

Associate



John S. Marten

Shareholder



Jacob C. Tiedt

Shareholder



Nathaniel Segal

Shareholder