On February 25, 2022, the U.S. Securities and Exchange Commission (SEC) announced that it unanimously voted to approve proposed changes requiring certain institutional investment managers [1] (managers) to report short sale-related information to the SEC.

Proposed Rule 13f-2 under the Securities Exchange Act of 1934 (Exchange Act) would require managers exercising investment discretion over short positions exceeding certain thresholds to file with the SEC, on a nonpublic basis, new Form SHO to report certain information relating to month-end short positions and certain related daily activity. The SEC would then take the details provided in Form SHO and publish 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 the Financial Industry Regulatory Agency (FINRA).

Ultimately, Proposed Rule 13f-2 seeks to address Congress’ directive under Section 929X of the Dodd-Frank Act to provide more transparency of short selling. SEC Chairman Gary Gensler stated that Proposed Rule 13f-2 “would strengthen transparency of an important area of our markets that would benefit from greater visibility and oversight.” If adopted, this new rule will make significant changes to short selling disclosure obligations for managers in the SEC’s effort to provide more insight on large short sellers’ behavior and mitigate stock price manipulation during times of irregular market volatility. Key aspects of the proposed changes are described in further detail below.

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