SEC seeks more disclosures of short-sale data

By Jeff Drew

The SEC wants to make more information about short stock positions available to investors.

The commission voted Friday to require certain institutional investment managers to report short sale-related information each month. The SEC then would make aggregate data about large short positions, including daily short-sale activity data, available to the public for each individual security.

"Proposed Rule 13f-2 would make aggregate data about large short positions available to the public for individual equity securities," said SEC Chair Gary Gensler. "This would provide the public and market participants with more visibility into the behavior of large short sellers."

The data collected and published by the SEC would supplement public short-sale data currently available from the Financial Industry Regulatory Authority (FINRA) and the stock exchanges.

In another vote, the SEC proposed adding a provision of Regulation SHO, Rule 205 that would establish a new "buy to cover" order marking requirement for broker-dealers. Regulation SHO, the SEC's primary short-selling regulation, requires broker-dealers to identify each sale order as either "long," "short," or "short-exempt," but the regulation does not currently have a corresponding requirement for purchase orders. Proposed Rule 205 would require a broker-dealer to mark a purchase order as "buy to cover" if the purchaser has any short position in the same security at the time the purchase order is entered.

In a related move, the board proposed amending the national market system plan governing the consolidated audit trail (CAT). The amendment would require CAT reporting firms to report "buy to cover" information to CAT. The proposed amendments also include a provision that would require each CAT reporting firm to indicate where it is asserting use of the bona fide market making exception under Regulation SHO.

In light of Proposed Rule 13f-2, the SEC voted to reopen the comment period for Proposed Exchange Act Rule 10c-1. The initial comment period ended Jan. 7 for proposed Rule 10c-1, which requires any person who loans a security on behalf of themselves or another person to report the material terms of those securities-lending transactions and related information to a registered national securities association.

The comment period for the proposals voted on Friday will be either 60 days following publication of the proposing news release on the SEC's website or 30 days following publication of the release in the Federal Register, whichever ends later.

— To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.

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