On October 13, 2023, the Securities and Exchange Commission (the “SEC”) adopted new Rule 13f-2 (the “New Rule”)1 under Section 13(f)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”), as well as related Form SHO.1 Under the New Rule, an institutional investment manager3 (each, a “Manager”) that meets or exceeds any of the reporting thresholds described below (collectively, the “Reporting Thresholds”) will be required to report, on a monthly basis using the related Form SHO, specified gross short position and activity data for equity securities. According to the SEC’s adopting release, the New Rule and related Form SHO are designed to provide greater transparency through the publication of short sale-related data to investors and other market participants.
While the New Rule becomes effective on January 2, 2024 (the “Effective Date”), the compliance date for the New Rule is January 2, 2025 (the “Compliance Date”).
Reporting Thresholds and Filing Obligations
Commencing on the Compliance Date, the New Rule will require a Manager to file a report on Form SHO for each equity security4 (including exchange-listed and over-the-counter securities and ETFs,5 but excluding fixed income securities) in accounts over which the Manager has investment discretion6 if such position meets or exceeds any of the Reporting Thresholds described below. Such filings will be required to be made electronically on EDGAR7 within 14 calendar days after the end of the calendar month in which the Manager meets or exceeds the relevant Reporting Threshold.8 While Form SHO filings will not be publicly accessible, the SEC will publish aggregated information derived from the data reported on Form SHO by all reporting Managers in respect of each class of equity securities.9
Threshold A, which applies to a Manager’s investment discretion6 over equity securities4 of an issuer registered under Section 12 of the Exchange Act or an issuer required to file reports pursuant to Section 15(d) of the Exchange Act (each, a “Reporting Company Issuer”), will require a Manager to report on Form SHO when it has investment discretion6 with respect to either: (i) a monthly average gross short position10 at the close of regular trading hours11 in the equity security4 with a U.S. dollar value of $10 million or more;12 or (ii) a monthly average gross short position10 at the close of regular trading hours11 as a percentage of shares outstanding in the equity security4 of 2.5% or more.13
Threshold B, which applies to a Manager’s investment discretion6 over equity securities4 of an issuer that is not a Reporting Company Issuer, will require a Manager to report on Form SHO when it has investment discretion6 with respect to a gross short position10 in the equity security with a U.S. dollar value of $500,000 or more at the close of regular trading hours11 on any settlement date during a calendar month.14
The New Rule requires a Manager that has previously filed on Form SHO to file an amendment within 10 calendar days if the Manager determines or is made aware that it has filed a Form SHO with errors that affect the accuracy of the information contained therein. Any such amendment would restate the prior filed Form SHO in its entirety and the Manager will be required to: (i) provide a written description of the revision being made; (ii) explain the reason for the revision; and (iii) indicate whether data from any additional Form SHO reporting period(s) (up to the last 12 calendar months) is affected by the amendment. In that regard, if data from one or more prior Form SHO reporting periods is affected by an amended and restated Form SHO, a Manager will be required to complete and file a separate amended and restated Form SHO for each previous calendar month so affected (up to the past 12 months), provide a description of the revision being made and explain the reason for the revision.
If you have any questions regarding the foregoing, please contact your Investment Management Group attorney at Seward & Kissel LLP.