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A U.S. court has remanded two 2023 SEC rules on securities lending and short sales, stating the SEC did not adequately assess their cumulative economic impact. While the rules remain in effect, the SEC must reconsider and quantify the economic effects as instructed by the court. This necessitates possible amendments and changes to compliance deadlines, as current exemptions will expire between January 2026 and March 2027. This ruling highlights the critical importance of conducting thorough economic analyses during regulatory rulemaking.
Statement Summary
A U.S. court of appeals has remanded two 2023 SEC rules regarding securities lending and short sales, asserting that the Commission failed to adequately assess their cumulative economic impact. The Court did not invalidate the rules but instructed the SEC to reconsider and quantify the economic effects. In response, the SEC has been directed to evaluate these rules and possibly recommend amendments or changes to compliance deadlines. Compliance exemptions currently in place for the related reporting requirements will end between January 2026 and March 2027, prompting the need for timely action. This decision underscores the importance of thorough economic analysis in regulatory rulemaking.
Original Statement
A U.S. court of appeals recently issued an opinion concerning two 2023 Commission rulemakings related to the securities lending and short sale markets. Although the Court did not vacate the rules, the Court held that the Commission had not properly considered their cumulative economic impact and remanded them to allow the Commission to consider and quantify the cumulative economic impact of the rules, consistent with the opinion.
I have directed Commission staff to evaluate the rules in light of the opinion and make recommendations for appropriate Commission action, including potential changes to the rules and adjustments to the related compliance dates.
Current temporary exemptions from compliance end January 2, 2026 for reporting under Rule 13f-2 and Form SHO; September 28, 2026 for reporting under Rule 10c-1a; and March 29, 2027 for the dissemination requirements under Rules 10c-1a(g) and (h)(3).
See also Reporting of Securities Loans, Release No. 34-98737 (Oct. 13, 2023), 88 FR 75644 (Nov. 3, 2023) (adopting 17 CFR 240.10c-1a); Short Position and Short Activity Reporting by Institutional Investment Managers, Release No. 34-98738 (Oct. 13, 2023), 88 FR 75100 (Nov. 1, 2023) (adopting 17 CFR 240.13f-2 and Form SHO); 17 CFR 240.10c-1a; 17 CFR 240.13f-2; Form SHO (referenced in 17 CFR 249.332).