Exchange Act Rule 13f-2 and Form SHO: SEC Grants One-Year Compliance Exemption

On February 7, 2025, the U.S. Securities and Exchange Commission announced a one-year temporary exemption from compliance with Exchange Act Rule 13f-2 ("Rule 13f-2") and related Form SHO filing requirements (the "Exemptive Relief"). This exemption defers the first Rule 13f-2 reporting period to January 2026, with the initial Form SHO filings now due by February 17, 2026. Before this relief, the compliance deadline was January 2025, with Form SHO filings due by February 14, 2025.[1]

Rule 13f-2, effective January 2, 2024, requires institutional investment managers exercising investment discretion over gross short positions in equity securities exceeding certain thresholds to submit a Form SHO filing within fourteen (14) calendar days of the end of each month. The rule is part of the SEC’s broader efforts to enhance transparency in short-selling activities, particularly concerning large short positions.

Key Takeaways from the Exemptive Relief

The first required Form SHO filings will now be due by February 17, 2026, rather than February 14, 2025. The SEC acknowledged concerns regarding the rapid turnaround time for compliance, operational challenges, and the need for additional technical guidance on Form SHO. Institutional investment managers have cited difficulties in implementing system updates required for compliance. The relief grants additional time for industry participants to finalize data-capturing processes and refine compliance frameworks. The relief also comes amid ongoing litigation by industry groups challenging Rule 13f-2 and related Exchange Act Rule 10c-1a, which mandates reporting securities lending activities to FINRA.

SEC Acting Chairman Uyeda noted that the exemption provides institutional investment managers additional time to implement the necessary technical updates while reaffirming the SEC’s commitment to monitoring short-selling activity. The SEC has indicated that it will continue engaging with industry stakeholders regarding any interpretative concerns. The SEC has used its authority under Section 13(f)(3) of the Exchange Act to provide this temporary relief, recognizing that granting institutional investment managers additional time will ultimately enhance the accuracy and completeness of reported data. The exemption aims to balance the need for regulatory oversight with the operational realities market participants face.

Next Steps for Market Participants

Institutional investment managers should use this exemption period to finalize their compliance systems and ensure they can meet reporting obligations when the rule takes effect. The SEC is expected to issue further guidance regarding Form SHO requirements, and firms should remain attentive to any updates. Firms concerned about Rule 13f-2 compliance should proactively communicate with the SEC to clarify reporting obligations and technical specifications. Given the pending legal challenges to Rule 13f-2 and related regulations, market participants should stay informed about potential changes or court rulings that may further impact compliance obligations.

The SEC’s decision to provide a one-year exemption from Rule 13f-2 compliance delays the rule's implementation. Still, firms should use this time to address operational challenges and refine their compliance frameworks. Crowell & Moring LLP will continue to monitor developments related to Rule 13f-2, Form SHO, and ongoing litigation. Please contact us for further guidance on preparing for compliance in 2026.