TLDR: The deadline for the first Form SHO filing, as mandated by Reg SHO, is fast approaching. Come February 14, 2025, applicable firms will need to file the first (of many) Form SHOs.
But what does that mean for your firm and what should you be aware of as the deadline draws near?
In this blog, we’ll dive into the most commonly asked Reg SHO questions, providing answers supplied by our expert consulting team to help you file on time every time.
Reg SHO is a new rule, which falls under the Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA). The rule, which was originally proposed in February of 2022, was adopted on October 13, 2023, with an effective date of January 1, 2024.
“The new rule and related form are designed to provide greater transparency through the publication of short sale related data to investors and other market participants. Under the new rule, institutional investment managers, includes any person, other than a natural person, investing in or buying and selling securities for its own account, and any person exercising investment discretion over an account of any other person, that meet or exceed certain specified reporting thresholds are required to report, on a monthly basis using the related form, specified short position data and short activity data for equity securities.”
The SEC provided additional background and context in the Reg SHO Fact Sheet, stating:
“Section 13(f)(2) of the Securities Exchange Act of 1934 (“Exchange Act”), added under Section 929X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires the Commission to prescribe rules to make certain short sale related data publicly available. The data reported in Form SHO filings and the aggregated data from Form SHO filings that are published by the Commission pursuant to Rule 13f-2 will among other things, help inform market participants regarding the overall short sale activity by reporting Managers and will bolster the Commission’s and other regulators’ oversight of short selling.”
The SEC has defined two thresholds for Reg SHO.
Threshold A
In general, the filing is required of institutional investment managers if their gross short position meets certain criteria, such as a monthly average gross short position of at least $10 million or 2.5% of a company’s total outstanding shares.
Threshold B
“Managers with a gross short interest position in an equity security of a non-reporting company issuer will be subject to a single-pronged reporting threshold structure: a gross short position in the equity security with a U.S. dollar value of $500,000 or more at the close of regular trading hours on any settlement date during the calendar month.”
Securities that would need to be included in the Form SHO reporting include:
- Each equity security that is of a class of securities that is registered pursuant to Section 12 of the Exchange Act or for which the issuer of that class of securities is required to file reports pursuant to Section 15(d) of the Exchange Act (“Reporting Company Issuer”) over which the Manager and all accounts over which the Manager (or any person under the Manager’s control) has investment discretion with respect to a monthly average gross short position that meets or exceeds a prescribed reporting threshold; and
- Each equity security that is of a class of securities of an issuer that is not a Reporting Company Issuer over which the Manager and all accounts over which the Manager (or any person under the Manager’s control) has investment discretion with respect to a gross short position that meets or exceeds a prescribed reporting threshold.
Beginning in 2025, applicable firms must file the Form SHO within 14 days of each month’s end.
As the compliance date for Reg SHO fell 12 months after the adopted date, firms which must abide by this rule must file their first Form SHO no later than February 14, 2025.
Firms will be required to continue to file their Form SHO no later than the 14th of every month thereafter.
Question: What are the key filing requirements my firm should be aware of?
Firms will be required to File via Edgar their Form SHO per the deadlines described above via the EDGAR filing system. The form will need to include:
- The Manager’s end-of-month gross short position in the equity security at the close of regular trading hours on the last settlement date of the calendar month; and
- For each individual settlement date during the calendar month, the Manager’s “net” activity in the reported equity security excluding any offsetting economic positions, which includes shares of the equity security being reported or derivatives, such as options.
Filings, while necessary, can be an extremely burdensome and time-consuming task for firms large and small.
But there has to be a better way, right? Right.
COMPLY’s Filing Experts take on that burden, so your team can focus on strategic compliance initiatives.
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