On October 13, 2023, the SEC adopted new Rule 13f-2 under the Exchange Act and new Form SHO requiring institutional investment managers to file confidential monthly reports with the SEC regarding certain short sale data. The SEC expects to publish data derived from Form SHO reports, aggregated across all reporting managers (i.e., without identifying individual managers), within one month after the end of the reporting calendar month (e.g., short sale data reported for October would be published before the end of November). This information is intended to supplement the current short sale transaction information provided by major U.S. stock exchanges and FINRA. Key elements of the new rule and reporting requirements are summarized below.

When the Reporting Obligation is Triggered

Rule 13f-2 will require institutional investment managers to file new Form SHO with the SEC within 14 calendar days of the end of each month, with respect to short sale activity and positions for which the manager exercises investment discretion, subject to reporting thresholds that differ based on whether the subject equity security is of a reporting or non-reporting issuer (i.e., whether the issuer is required to file reports pursuant to the Exchange Act), as follows:

• For each equity security of a reporting company issuer when the manager has either (1) a monthly average gross short position at the close of regular trading hours in the equity security of $10 million or more, or (2) a monthly average gross short position at the close of regular trading hours as a percentage of shares outstanding in the equity security of 2.5% or more.
• For each equity security of a non-reporting company issuer when the manager has a gross short position in the equity security with a U.S. dollar value of $500,000 or more at the close of regular trading hours on any settlement date during the calendar month. 

Thus, for equity securities issued by reporting companies, there is a two-prong threshold calculated as monthly averages, whereas, for non-reporting companies, there is a single dollar threshold that can be triggered following a single day in which the short position exceeds $500,000.

Economic short positions created through the use of swaps or other derivatives do not need to be included when calculating the reporting thresholds.

Reporting Persons

• “Institutional investment manager” includes any person, other than a natural person, investing in or buying and selling securities for its own account, and any person exercising investment discretion with respect to the account of any other person.
• Consequently, the definition of “institutional investment manager” for new Rule 13f-2 is the same that is used for purposes of current Schedule 13F reporting requirements which, notably, apply to managers that exercise investment discretion over $100 million or more in Section 13(f) securities. As practitioners know, various types of firms may unknowingly fall within the scope of Form 13F reporting obligations, even if not an SECregistered investment adviser—i.e., including brokerdealers, banks, bank holding companies and other financial institutions and firms. Without the $100 million threshold that applies to Form 13F reporting obligations, the new short sale reporting regime captures an even broader group of “institutional investment managers.” The SEC’s adopting release notes that the term may include various market participants, including investment advisers, brokers and dealers, banks, insurance companies and pension funds, among others.

Information Required in Form SHO

For each reported equity security, an institutional investment manager’s Form SHO must include:

• the end-of-month gross short position in the equity security at the close of regular trading hours on the last settlement date of the calendar month; and
• the “net” activity in the reported equity security, which includes activity in derivatives, for each individual settlement date during the calendar month.

Key Dates

Rule 13f-2 will become effective on January 2, 2024. The compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date.

The SEC’s adopting release is available here, a related fact sheet is available here, and a related press release is available here.