MFA Reiterates Concerns on SEC Short Position Reporting Proposal

The Managed Funds Association ("MFA") argued that the SEC's proposed regulatory framework to require disclosure of short position information is "duplicative" and "unnecessarily complex and costly."

In a second comment letter (see previous coverage), the MFA, agreed with the objective to limit disclosure to aggregated, anonymized short position data, but raised the following issues:

Duplicative Reporting of Short Position Data. The MFA cited less burdensome alternatives to achieve the SEC’s policy objective. The MFA argued that it would be more efficient for the SEC to coordinate with FINRA and its existing short interest reporting framework to make necessary incremental improvements, if any. The MFA pointed to FINRA’s publication of short interest reports for all equity securities, including both exchange-listed securities and OTC equity securities, noting expansion and improvement in that disclosure framework since the SEC’s proposal was made. The MFA stated that the SEC disregards this available data in favor of creating an "entirely new duplicative reporting framework."

Cost Benefit Analysis and Compliance Timeline. The MFA urged the SEC to (i) "simplify compliance with the rule and provide much needed clarity," (ii) conduct a revised cost-benefit analysis of the impact of Rule 13f-2 and Form SHO on trading strategies and investors, the markets and capital formation and (iii) consider the sheer scope of recently proposed rules and their impact on investment advisers. The MFA also requested that the SEC specify a compliance date providing at least 18 months for implementation, raising concerns about the development of appropriate systems to capture and report information appropriately, and issues regarding the availability and integration of third-party software solutions.