New Proposed SEC Rule Would Require Increased Disclosure of Short Sale Information


Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC was required to propound rules making certain short sale data available no less frequently than monthly. The SEC recently took steps to implement that directive by publishing Proposed Rule 13f-2 on February 25, 2022, in order to increase the scope of short-sale data available to regulators and the investing public. The SEC believes that the proposed rule would help the SEC reconstruct significant market events and aid it in identifying potentially abusive trading practices. 

The proposed rule would require that institutional money managers file certain short sale data with the SEC on a monthly basis, with some of the data being aggregated and made available to the public. Specifically, the proposed rule would require those institutional money managers to file a confidential form, Proposed Form SHO, with the SEC within fourteen (14) calendar days after the end of each month for each security and all amounts that meet or exceed either of the following thresholds:

•    For any equity security of an issuer that is registered pursuant to Section 12 of the Exchange Act or for which the issuer is required to file reports pursuant to Section 15(d) of the Exchange Act in which the manager meets or exceeds either a gross short position in the equity security with a US dollar value of $10 million or more at the close of any settlement date during the calendar month, or a monthly average gross short positions as a percentage of shares outstanding in the equity security of 2.5 percent or more; or 

•    For any equity security of an issuer that is not a reporting company issuer as described above in which the manager meets or exceeds a gross short position in the equity security with a US dollar value of $500,000 or more at the close of any settlement date during the calendar month. 

If an institutional money manager meets either of the above thresholds, they must file Proposed Form SHO with the SEC which would include the following information: the name of the eligible security; end of month gross short position information; and daily trading activity that affects a managers reported gross short position for each settlement date during the calendar month of the reporting period. Some of this data would then be aggregated and published for the use of the investing public. 

The SEC hopes that by requiring increased disclosure, the new rule will discourage the manipulative or abusive use of short selling information. The proposed rule is not yet law and it remains to be seen if any changes will be made before the rule is finalized. 

A complete copy of the SEC’s proposal can be found here: https://www.sec.gov/rules/proposed/2022/34-94313.pdf 
 

About Faruqi & Faruqi, LLP

Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, personal injury and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Georgia and Pennsylvania.

Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, direct purchasers, consumers and employees.

To schedule a free consultation with our attorneys and to learn more about your legal rights, call our offices today at (877) 247-4292 or (212) 983-9330.

About Dylan B. Weeks

Dylan B. Weeks is an Associate in Faruqi & Faruqi, LLP's New York office. His practice is focused on securities litigation.

Tags: faruqi & faruqi, investigation, news, litigation, settlement notice, case, faruqi law, faruqi blog, faruqilaw, Dylan B. Weeks, securities litigation Dylan B. Weeks Dylan B. Weeks
Associate at Faruqi & Faruqi, LLP

New York office
Tel: (212) 983-9330
Fax: (212) 983-9331
E-mail: dweeks@faruqilaw.com
Social: LinkedIn

Finding us

Our Offices


Our offices are nationwide. If you have any questions about a case or our firm, please contact us.

New York

685 Third Avenue 26th Floor
New York, New York 10017
(212) 983-9330
(877) 247-4292
(212) 983-9331

California

1901 Avenue of the Stars Suite 1060
Los Angeles, California 90067
(424) 256-2884
(424) 256-2885

Georgia

3565 Piedmont Road NE Building Four, Suite 380
Atlanta, Georgia 30305
(404) 847-0617
(404) 506-9534

Pennsylvania

1617 JFK Boulevard, Suite 1550
Philadelphia, Pennsylvania 19103
(215) 277-5770
(215) 277-5771

Faruqi & Faruqi office in New York, New York

Faruqi & Faruqi office in Los Angeles, California

Faruqi & Faruqi office in Atlanta, Georgia

Faruqi & Faruqi office in Philadelphia, Pennsylvania