Client Alert

SEC Adopts Rules Enhancing Short Sale Disclosures

October 19, 2023

By Brad Bondi,Sean Donahue,Eduardo Gallardo,& Steven W. Shuldman

On October 13, 2023, the U.S. Securities and Exchange Commission (the “SEC”) adopted final rules requiring the reporting and disclosure of short sale trade data information. New Rule 13f-2 implements new obligations on certain institutional investment managers (“Managers”) to report short position and activity data for certain equity securities on new Form SHO. The SEC also amended the national market system plan governing the consolidated audit trail (“CAT NMS Plan”) relating to disclosure of short sales made under the bona fide marketing exception. The SEC promulgated the new rules pursuant to its statutory mandate under Section 929X of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to increase transparency of information relating to short selling, including data which may indicate abusive naked short selling, which is prohibited under Regulation SHO. Together, the new rules may provide public companies with greater protection against activist short-sale attacks by providing more real-time information regarding Manager’s short positions and by uncovering and discouraging naked short selling.

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