The Securities and Exchange Commission (SEC) has recently introduced Rule 13f-2, aimed at bolstering transparency in short selling activities. This rule mandates the reporting of certain short sale-related data through Form SHO, providing valuable insights into market dynamics.

Overview for Registered Investment Advisers

Here’s a succinct overview of the key aspects of the new rule for RIA’s:

Purpose

• The aim of the Rule is to make certain short sale related data publicly available. This data, which will be reported in new Form SHO will, among other things, help inform market participants regarding the overall short sale activity by reporting Managers and will strengthen the SEC’s of short selling.

Deadline

• The reporting will be done on Form SHO through SEC’s EDGAR system within 14 days after each calendar month’s end.

Reporting Requirements

• For each such equity security, the institutional investment manager must file a Form SHO with information including:
  • the end-of-month gross short position and
  • for each individual settlement date during the calendar month, the net activity in the reported equity security.

Form SHO Content

• Form SHO consists of a cover page and two information tables:
• Cover Page: Basic information about Managers and designated contact employees.
• Table 1: Gross short position in shares and rounded to the nearest dollar as of the last settlement date of the reporting period.
• Table 2: Net change in short position for each settlement date during the reporting period.

These reporting requirements aim to enhance transparency and accountability in the short selling landscape, enabling regulators and market participants to better understand and monitor market dynamics. By providing standardized reporting through Form SHO, the SEC strengthens its oversight capabilities, ultimately fostering investor confidence and market integrity. Market participants should ensure compliance with these reporting obligations to uphold regulatory standards and contribute to a fair and transparent marketplace.