The Investment Company Institute (ICI) has asked the Securities and Exchange Commission (SEC) in a comment letter to delay enforcement of its new short sale disclosure rules (the “Short Sale Final Rules”) until additional compliance guidance is provided. The Short Sale Final Rules, finalized in October 2023, require certain institutional investment managers to report short sale-related data within 14 days following month-end. The SEC will then publish aggregated data by security while keeping individual trade details confidential. Additionally, a separate rule mandates that securities lending transactions be reported to the Financial Industry Regulatory Authority (FINRA) by the end of the day on which a securities lending transaction is effected or modified, with certain details made public by the following business morning.
In its comment letter, the ICI emphasized the urgency of enforcement relief, citing the fast-approaching February 14, 2025, deadline for the first disclosures. The ICI expressed concern that institutional investment managers lack necessary reporting and interpretive guidance, leaving them to determine their own compliance methods and system designs for Rule 13f-2 and Form SHO.
The Short Sale Final Rules (and related securities lending rule) have also faced legal challenges. In December 2023, The National Association of Private Fund Managers (NAPFM), Alternative Investment Management Association (AIMA), and Managed Funds Association (MFA) filed a lawsuit asking the U.S. Court of Appeals for the Fifth Circuit to invalidate the Short Sale Final Rules. A decision has not been made on this case.
In October 2023, then Commissioner Uyeda, now Acting Chair, said that “[given] the unfortunate, but likely, consequence of discouraging publicly beneficial short selling activity” he was “unable to support” the Short Sale Final Rules.