The Securities and Exchange Commission (the “SEC”) recently adopted Rule 13f-2 and Form SHO under the Securities Exchange Act of 1934 (the “Exchange Act”), implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. These new regulations are intended to enhance transparency in short selling and introduce significant changes to the reporting obligations for certain institutional investment managers. The compliance date for Rule 13f-2 and Form SHO was January 2, 2025, and the first Form SHO filing deadline is February 14, 2025.

Who must file a Form SHO under Rule 13f-2?

Institutional investment managers must file a Form SHO for any short positions in equity securities that exceed specific thresholds during any calendar month. These thresholds (described below) are based on whether the issuer of the relevant security is a reporting or non-reporting company. For purposes of Form SHO, the definition of “institutional investment manager” mirrors the definition of that term in Schedule 13F, encompassing a broad range of persons and entities that exercise discretion over investment accounts, extending beyond registered investment advisers.[1]

What types of securities are covered by Rule 13f-2?

The term “equity securities” under Rule 13f-2 is a broad definition that expands upon the types of “securities” covered by Schedule 13F. For purposes of Rule 13f-2 and Form SHO, this includes the following: (i) common and preferred stock; (ii) securities that are exercisable, convertible or exchangeable for equity securities; and (iii) securities traded exclusively outside the U.S. (e.g., those listed on non-U.S. exchanges).

What are the reporting thresholds under Rule 13f-2?

Reporting Issuers: For short positions related to issuers with equity securities registered under Section 12 of the Exchange Act or required to file reports under Section 15(d) of the Exchange Act, a manager’s reporting threshold is

• a monthly average[2] gross short position valued at $10 million or more at the close of regular trading hours during the calendar month reporting period or
• a monthly average[3] gross short position during the calendar month reporting period equal to 2.5% or more of the shares outstanding.

Non-Reporting Issuers: For short positions related to issuers with equity securities, not registered under Section 12 of the Exchange Act or are not required to file reports under Section 15(d) of the Exchange Act, a Manager’s reporting threshold is

• a gross short position valued at $500,000 or more at the close of any settlement date during the calendar month.

Note:  For purposes of determining the reporting thresholds described above, a manager’s gross short position in an equity security is determined without any netting against long or derivative positions within the same equity security.

Exclusions for Threshold Calculations:  Managers shorting exchange-traded funds (ETFs) are not required to include the ETF’s underlying securities in the threshold calculations. Moreover, short positions established through derivatives are excluded from the reporting thresholds.

What is the filing deadline for filing Form SHO under Rule 13f-2?

Form SHO must be filed via the SEC’s EDGAR filing system within 14 calendar days following the end of each calendar month during which a short position exceeds any of the relevant reporting thresholds described above. A previously filed Form SHO must be amended to correct any errors that affect the accuracy of the information reported on the Form SHO within 10 calendar days of discovering such error.

What is included in a Form SHO filing?

Form SHO includes a cover page and two reporting tables:

• Cover Page: Provides basic filing information about the manager and the underlying security.
• Table 1: Reports the number of shares representing the relevant gross short position at the close of the last settlement date, including the corresponding U.S. dollar value.
• Table 2: Provides details on daily activity impacting the relevant gross short positions during the reporting period, including transactions like short sales, options trading, and other activities.

Are Form SHO filings made available to the public?

Although Form SHO filings are confidential, the SEC will publish aggregate short position data for each reported equity security monthly, starting in April of 2025. This data will supplement the short sale data provided by U.S. stock exchanges and FINRA.

For additional details, please refer to the SEC’s Fact Sheet on Rule 13f-2 and the SEC’s Adopting Release of Rule 13f-2.

[1] Section 13(f)(6)(A) of the Exchange Act defines “institutional investment manager” to include “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.”

[2] To determine the monthly average under this threshold, a manager must determine its gross short position at the close of regular trading hours in the equity security on each settlement date during the calendar month and multiply that figure by the closing price at the close of regular trading hours on the settlement date (i.e., the “end of day dollar value”). The manager must then add all end of day dollar values during the calendar month and divide that sum by the number of settlement dates in the month.

[3] To determine the monthly average under this threshold, a manager must (a) determine its gross short position at the close of regular trading hours in the equity security on each settlement date during the calendar month and divide that figure by the number of shares outstanding in such security at the close of regular trading hours on the settlement date and (b) add up the daily percentages during the calendar month as determined in (a) and divide that sum by the number of settlement dates in the month. The number of shares outstanding of the security for which information is being reported must be determined by reference to the issuer’s most recent annual or quarterly report, and any subsequent update thereto, filed with the SEC.