The SEC’s proposed short-selling rule is part of a focus on more disclosure

Trader Talk

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler testifies before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Washington, U.S., September 14, 2021.
Evelyn Hockstein | Reuters

The Securities and Exchange Commission proposed new rule that would tell investors more about short sales is part of a broad theme of more disclosure.

The proposed rule would require certain investment managers to report short-sale-related information to the commission on a monthly basis. The SEC would then make the aggregate data available to the public for each individual security.

The SEC emphasized this data would be aggregated, so it would not reveal the positions of individual managers, and that this would supplement short-sale data that is already publicly available.

The SEC has become much more interested in short sales since the Gamestop saga, in which the stock went from roughly $5 in October 2020 to over $400 in January 2021, partly on a massive short squeeze.

This is only a proposed rule. It will now be put out for public comment. The commission then can modify the rule and put it out again for comment, take no action, or move to a final rule proposal.

This is part of an aggressive push by the SEC to expand its regulatory reach. There are more than 50 proposed rules that Gensler is considering this spring, one of the largest regulatory pushes by the SEC in decades.

In the last several months, the SEC has proposed additional disclosures from private funds (hedge funds and private equity funds), more disclosure from companies regarding cybersecurity risks and attacks, more details on how corporations tie their executive pay to performance, and shortening the settlement cycle for stocks from two days to one.

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