SEC TO REQUIRE 13F-TYPE REPORTING FOR SHORT POSITIONS
The SEC is proposing new disclosure rules that will require investment managers with more than $100 Million invested in securities to publicly report their daily short positions. The SEC already requires firms to file 13F forms to disclose their long positions. The measure is in addition to new rules prohibiting naked short-selling including a new anti-fraud rule for those who mislead about their naked short-selling. The SEC has also temporarily banned short selling in financial stocks. The SEC Division of Enforcement has also indicated that it “will obtain disclosure from significant hedge funds and other institutional traders of their past specific trading positions” in order to combat market manipulation.
OUR TAKE: The SEC is trying to harness short-term trading by hedge funds. However, this reporting burden will apply to all registered investment managers. The details of the proposed reporting raise some practical questions: How will the SEC require a firm to calculate the $100 Million? Will it apply to a firm’s net exposure or require it to aggregate long plus short positions?