Mastering 13f-2 Reporting: Key Insights for Staying Ahead of the Curve

Understanding the 13f-2 Reporting Requirements

The 13f-2 regulation introduces a short position reporting framework that expands beyond previous FINRA broker-dealer requirements. Institutional investment managers, including but not limited to hedge funds, banks, and insurance companies, must now assess their exposure and determine if they qualify as reporting entities. Those that qualify must report gross short positions meeting specific thresholds:

• Reporting Issuers: Monthly average of daily short positions ≥ $10M or 2.5% of the issuer's shares outstanding.


• Non-reporting Issuers: Threshold of $500,000 at the close of any settlement date within a calendar month.

Both exchange-listed and over-the-counter (OTC) securities (including certain derivatives) fall under the rule, though some exceptions and challenges with non-US securities were highlighted. Firms must determine compliance on a monthly, security-by-security basis, adding complexity to reporting processes.

In-Scope Securities and Global Applicability

Both exchange-listed and OTC securities are included under 13f-2, along with derivatives and ETFs (exceptions do apply here). However, challenges arise from potential extraterritorial application, as the rule could cover non-US securities listed on foreign markets. The ambiguity around this global applicability has sparked legal debates, with some aspects of the rule under pending litigation.

Challenges and Complexities

The panel highlighted operational and compliance challenges, such as:

• Data Sourcing, Monitoring and Aggregation: A significant hurdle is the daily monitoring of short positions despite a monthly reporting requirement. Firms must aggregate transactional data to build accurate month-end positions, which requires:


• Aligning settlement-date reporting with transactional systems.


• Managing multiple data sources for accurate aggregation and reporting.


• Including equity derivatives and ETFs (when applicable) in calculations.
• Reporting Scope Ambiguity: The absence of a defined list of eligible securities means firms will need to monitor a broader range of securities, including OTC and foreign securities.


• Impact on Investment Strategies: The monthly average of daily positions could affect how firms execute short strategies, with risks of revealing trading behavior if aggregated data is improperly managed.

Pending Litigation and Its Impact

Ongoing litigation around the rule’s validity introduces further uncertainty. The SEC faces challenges over potential conflicts between 13f-2 (Short Sale Rule) and Rule 10c-1a (Securities Lending Reporting Rule). Firms must stay updated on these developments but should still proceed with preparations for compliance regardless of potential legal outcomes.

Timely Preparation is Critical

With January 2, 2025, as the compliance deadline, firms must act quickly to implement necessary processes. Key actions to take comprise of:

• Operational Readiness: Preparing for compliance involves data management, compliance, and IT teams to handle:


• Data enrichment and validation to ensure reporting accuracy.


• Daily monitoring systems to track position changes daily and prevent reporting delays. Every day counts toward calculating the monthly average.


• Developing processes to handle new XML-based submission requirements for filing on the SEC’s EDGAR platform.
• Mock Filings: Conduct trial runs to ensure systems can handle data aggregation and meet 14-day reporting deadlines after each calendar month.

Practical Solutions to Manage Compliance

Firms can choose from different approaches to meet the new requirements, such as vendor solutions that offer:

• Software tools like Confluence’s Signal platform, which automates monitoring and filing capabilities integrated with the SEC’s EDGAR system, and Managed services to offer end-to-end support, from data aggregation to submission, reducing in-house operational burdens.

Some firms may opt to build internal systems, but this approach requires significant resourcing and infrastructure to handle compliance efficiently. Manual tracking via spreadsheets may suffice for firms with minimal short positions, though it introduces operational risks.

Final Thoughts: Start Preparing Now

With multiple regulatory changes rolling out in 2025, early preparation is crucial. Firms should assess their short positions, data workflows, and operational capabilities to ensure readiness by January 2, 2025. Whether choosing a managed service, vendor solution, or in-house approach, having robust daily monitoring processes and clear workflows will be crucial to staying compliant under 13f-2.

The key takeaway: Regardless of litigation outcomes, firms should move forward with compliance efforts to avoid disruptions. Now is the time to engage with vendors, administrators, and internal teams to determine the best strategy for your firm.

If you need further assistance or wish to explore automated solutions like Signal, contact your Confluence or SEI representative today.

About Confluence

Confluence is a leading global technology solutions provider committed to helping the investment management industry solve complex data challenges across the front, middle and back office. From data-driven portfolio analytics to compliance and regulatory solutions, including investment insights and research, Confluence invests in the latest technology to meet the evolving needs of asset managers, asset owners, asset services and asset allocators to provide best-of-breed solutions that deliver maximum scalability, speed and flexibility, while reducing risk and increasing efficiency. Headquartered in Pittsburgh, PA, with 900+ employees in 15 offices spanning across the United Kingdom, Europe, North America, South Africa, and Australia, Confluence services over 1000 clients in more than 40 countries. For more information, visit www.confluence.com

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