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Form SHO Misconceptions: How to Know If You Need to File

Under Rule 13f-2, investment advisers must monitor their month to month short selling activity in equity securities. If a reporting threshold is met during a calendar month, then a Form SHO filing is due 14 calendar days after month end. January 2025 was the first month after the compliance date of Rule 13f-2, so the question is: do you need to file Form SHO?

Short positions in an equity security must meet one of the following reporting thresholds before a filing is required:

Equity Security Threshold of a Reporting Issuer –

  • $10 Million: A monthly average gross short position at the close of regular trading hours in the equity security of at least $10 million; or
  • 2.5%: A monthly average gross short position at the close of regular trading hours as a percentage of shares outstanding in the equity security of at least 2.5%.

A reporting company issuer is an SEC registered issuer under the Exchange Act or must file reports pursuant to Section 15(d) of the Exchange Act.

Equity Security Threshold of a Non-reporting issuer –

  • $500,000: Each gross short position with a value of $500,000 or more at the close of regular trading hours on any settlement date during the calendar month.

Non-reporting company issuers include all issuers that do not qualify as reporting company issuers.

Misconceptions

  • Short positions in different equity securities are not aggregated for the purposes of the reporting thresholds. The reporting threshold must be met by a single equity security. Otherwise no filing is necessary.
  • Only equity securities are counted for the reporting threshold. This excludes fixed income securities, options, security-based swaps, warrants and derivatives that do not qualify as equity securities.
  • The “gross short position” excludes any offsetting positions. Only the number of shares of the equity security being held short are used for calculating the reporting threshold. Long positions in the equity security do not reduce the gross short position.
  • The “gross short position” includes shares being held short at an affiliate. Monitor short positions at the adviser and any affiliate controlled by the adviser to determine if the total shares of the equity security being held short meet the reporting threshold.

Now is the time to check your January gross short positions for these reporting thresholds. If you do cross a threshold, your first Form SHO will be due on February 14, 2025.  If you do not cross a threshold, test your monitoring and the monitoring of any affiliate. Continue to look at your gross short positions at each month end going forward.

If you have any questions our team of regulatory experts can help. Contact us today if you’re interested in learning more.