Introduction
On August 25, 2025, the U.S. Court of Appeals for the Fifth Circuit issued a pivotal decision that could reshape the regulatory landscape for securities lending and short selling. The court partially granted a petition for review of SEC Rules 10c-1a and 13f-2, remanding both rules to the SEC for further analysis. This decision underscores the importance of evaluating the cumulative economic impact of interconnected regulations and invites renewed scrutiny of how transparency measures are implemented in financial markets.
Background – The SEC Rules
In October 2023, the SEC adopted two rules under the Dodd-Frank Act:
- Securities Lending Rule (10c-1a): Requires reporting of securities loan transactions to FINRA, with daily publication and a 20-day delay for loan size data.
- Short Sale Rule (13f-2): Mandates monthly reporting of short sale data by institutional investment managers via the SEC’s EDGAR system.
Both rules aim to enhance market transparency and oversight but have raised concerns due to their overlapping scope and potential unintended consequences.
Petitioners’ Challenges
Industry groups such as the National Association of Private Fund Managers and the Managed Funds Association challenged the rules on several grounds:
- 10c-1a: Alleged overreach of SEC authority and insufficient public comment. The court rejected these claims.
- 13f-2: Criticised for ignoring less burdensome alternatives and applying to foreign transactions. The court upheld the SEC’s rationale and jurisdiction.
- Combined Impact: Petitioners argued the rules conflicted, with disclosure under 10c-1a potentially undermining proprietary protections in 13f-2. They also claimed the SEC failed to assess the cumulative economic impact.
Court Decision
While the Fifth Circuit upheld the SEC’s authority to implement both rules, it found the agency had not adequately considered their combined economic impact. Consequently, the court remanded both rules for further review but did not vacate them, allowing the SEC to justify the rules through additional analysis and public engagement. No timeline was set for revised orders.
How Funds-Axis Can Help
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- Major Shareholding Disclosures
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Foreign Investment Rules
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Stay ahead of regulatory changes. Contact our regulatory experts today to learn how Funds-Axis can help your firm navigate the complexities of shareholder disclosure and short selling regulations. Schedule a demo or reach out for a consultation!
