SEC Short Selling Rule 13F-2 and 13D/G: Key Updates and Compliance Strategies

The SEC’s updated shareholding disclosure rules for substantial shareholding (SH) and short selling (SS) are now in force, with compliance deadlines continuing throughout the year. Since February 5, 2024, institutional investors have been adapting to these regulatory shifts. As further deadlines approach, firms must ensure their reporting processes are ready to meet the new requirements, mitigating compliance risks.
 

Firms already familiar with SH disclosures will need to adapt to tighter deadlines and new reporting formats associated with the revised SEC Schedules 13D/G and the new short-sale Rule 13F-2. These disclosures track beneficial ownership of U.S.-listed securities, require complex ownership calculations and mandate detailed disclosures upon threshold breaches.

The amendments to Schedule 13D/G introduce additional complexity, not least the inclusion of cash-settled derivative securities, a transition to structured XML-based reporting and accelerated filing deadlines.

Meanwhile, the new short-selling rules create further challenges. Unlike SH amendments, many firms are unfamiliar with short-sale disclosures in the U.S. While European regulations already impose strict reporting for short-sale data, Rule 13F-2 now brings a similar approach stateside.
 

Rule 13F-2 applies to institutional investors with short positions meeting or exceeding a monthly average of $10 million USD or 2.5% of a registered security’s outstanding shares. Impacted firms must report specific short-position and short-activity data for equity shares affecting many asset managers.

The new SHO form must be submitted within 14 days of the month’s end. Compliance can be operationally challenging, as firms need to carefully compile positions and conduct intensive monthly monitoring. As of Jan. 2, 2025, Form SHO must be submitted in machine-readable format.
 

To meet the new SEC requirements, firms need to address several challenges:

• Ownership data: Identifying and managing new beneficial ownership data, particularly for cash-settled instruments.
• Short-sale data: Collecting and processing short-sale information to meet disclosure obligations.
• Monitoring: Adjusting to stricter monitoring cadences and shorter submission timelines.
• Tighter deadlines: Implementing workflows to handle compressed 13D/G submission timelines.
• XML reporting: Transitioning to structured machine-readable formats by December 2024 (SH) and January 2025 (SS).

To manage compliance efficiently, many firms will need to refine their processes for quickly identifying and reporting beneficial ownership breaches.
 

Given the scope and complexity of these regulatory changes, firms are advised to take a strategic approach to SEC reporting. This is also an opportunity to futureproof shareholding disclosure systems. A robust data management and reporting system should:

• Integrate equity and cash-settled derivative data from multiple sources.
• Accurately track beneficial ownership through a structured data dictionary.
• Reflect complex entity hierarchies allowing for precise aggregation/disaggregation.
• Apply SEC rules transparently and flexibly to accommodate various entity structures. (Some firms may require certain operating model rule-modifications.)
• Calculate ownership thresholds efficiently and alert firms to breaches in real time.
• Generate reports in required formats (XML, XBRL, HTML) within submission timelines.
• Be SaaS-enabled to handle high data volumes and support ongoing regulatory changes.

Regardless of a firm’s exact approach to adoption, flexibility remains key. A system must be globally scalable, enabling firms to meet shareholding disclosure requirements consistently across jurisdictions.
 

In this context, firms should also evaluate their Consolidated Audit Trail (CAT) trade and transaction reporting approach. Significant overlap exists between CAT reporting and Rule 13F-2 data requirements. Partnering with a vendor that understands regulatory-reporting workflows can help firms efficiently leverage shared datasets for compliance.
 

Regulation is always changing. The SEC’s revised shareholding and short-selling disclosure rules present challenges but also opportunities for firms to enhance their compliance strategies. With compressed deadlines, new reporting formats and expanded data requirements now in force, firms must continue to take proactive steps to streamline processes and mitigate risk.

By leveraging automation, ensuring robust data management and staying ahead of regulatory deadlines, financial institutions can more effectively navigate changes like these. A well-prepared compliance framework will not only address current SEC mandates but also provide a foundation for future regulatory shifts.

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