CURRENT MONTH (February 2025)
SEC Grants a One-Year Exemption from Rule 13f-2 Compliance and Form SHO Reporting
By Karen Liu, Reid & Wise LLC
On February 7, 2025, the U.S. Securities and Exchange Commission (“SEC”) provided a temporary one-year exemption (from February 7, 2025, to January 2, 2026) (the “Exemption”) from compliance with Rule 13f-2 under the Securities Exchange Act of 1934, as amended (“Exchange Act”) and from the relevant reporting on Form SHO. Accordingly, the first Form SHO filings for in-scope institutional investment managers would be due upon the fourteenth calendar day after the end of January 2026, for the January 2026 reporting period. Because of two weekend days and a following federal holiday, the first filing due date would be February 17, 2026.
Rule 13f-2 was adopted by the SEC on October 13, 2023; it requires institutional investment managers that meet or exceed certain specified thresholds to file Form SHO with the SEC via the SEC’s EDGAR system within fourteen calendar days after the end of each calendar month with regard to certain equity securities. Rule 13f-2 took effect on January 2, 2024. The compliance date was January 2, 2025. Without the Exemption, the initial Form SHO filings were originally due by February 14, 2025, for the January 2025 reporting period.
As explained in the SEC’s release order, the temporary Exemption was granted out of the following concerns:
- The SEC released technical updates (i.e., the web-fillable version of Form SHO, the related Form SHO XML technical specifications, and EDGAR Filer Manual updates) with respect to Form SHO filings only on December 16, 2024 (the “SHO Technical Updates”), a few weeks before January 2, 2025, the original compliance date. Therefore, industry participants may need more time to complete implementation of systems builds and testing.
- Both prior to and after the SHO Technical Updates, certain industry participants requested additional time to implement Form SHO reporting.
- Industry participants indicated that certain firms were “subject to full code freezes at year-end to help manage and mitigate IT risk.”
- With additional time, the SEC staff may address any outstanding operational and compliance questions regarding Form SHO reporting raised by various industry participants.
- By giving reporting managers more time to resolve system and operational issues, the temporary Exemption will help enhance the accuracy of the reporting data that would ultimately be provided to investors.
Although not mentioned in the SEC’s release order or press release, Rule 13f-2 is also currently facing ongoing litigation by industry groups before the U.S. Court of Appeals for the Fifth Circuit to overturn the rule. It is possible for the court to issue a ruling this year.
According to SEC Acting Chairman Mark Uyeda, despite the Exemption, “abusive naked short selling as part of a manipulative scheme remains unlawful” and subject to the SEC’s regulation.
During this one-year relief, it is advisable for in-scope institutional investment managers to develop, program, and test their systems; resolve operational issues; and update their compliance policies and procedures. If necessary, they may also raise any operational and compliance questions to the SEC and expect possible FAQs and guidance from SEC staff.
PCAOB Withdraws Firm and Engagement Metrics and Expanded Firm Reporting Rules
By Thomas W. White, Retired Partner, WilmerHale
As previously noted, on November 21 of last year, the Public Company Accounting Oversight Board adopted two sets of rules that would substantially expand public disclosures and confidential reporting by registered public accounting firms. One set of rules prescribed new requirements for certain registered firms to disclose annually a standardized set of quantitative performance metrics about their audits and audit practices. The other set amended the PCAOB’s current annual and special reporting forms to expand the information required to be reported by registered firms. (See our previous note about these rules.)
These rules were subject to approval by the Securities and Exchange Commission. The PCAOB filed proposals to approve the rules with the SEC, and the SEC initiated proceedings to consider whether to approve or disapprove the rules. The rules garnered significant opposition from accounting firms and others in comments filed with the SEC.
On February 11, the SEC announced that the PCAOB had withdrawn the proposed rules. The effect of the withdrawal is to terminate the SEC proceedings to consider the rules. Theoretically, the withdrawal preserves the PCAOB’s ability to resubmit the rules (in the same or revised form) at some future point in time. However, the viability of such an approach likely will be impacted by changes in leadership under the new presidential administration at the SEC and, potentially, the PCAOB itself.
