[co-author: Carlos Juarez]*
On August 25, 2025, the United States Court of Appeals for the Fifth Circuit issued an opinion in National Association of Private Fund Managers v. SEC addressing Securities and Exchange Commission (SEC or the “Commission”) Rule 10c-1a under the Securities Exchange Act of 1934, or the Securities Lending Reporting Rule, and Rule 13f-2 under the Exchange Act, or the Short Position Reporting Rule. The court concluded that the Commission acted arbitrarily and capriciously by failing to consider the cumulative economic impact of the two rules and remanded them to the agency without vacatur for further analysis.
The two rules, finalized in October 2023, were designed to increase transparency in securities lending and short sale markets. Rule 10c-1a requires covered securities loans to be reported to FINRA’s Securities Lending and Transparency Engine, with certain data published shortly thereafter. Rule 13f-2 requires institutional investment managers to file monthly reports on large short positions and related short sale activity through the SEC’s EDGAR system, from which the SEC publishes aggregated short sale data.
Although adopted at the same meeting, the SEC analyzed Rule 10c-1a without accounting for Rule 13f-2, reasoning that the short sale rule was still at the proposal stage. The court rejected the SEC’s reasoning, calling it a “short-cutting fiction,” and held that the agency must assess the combined impact of the two interrelated rules. The panel made clear that its holding was narrow. It upheld the SEC’s statutory authority, its notice-and-comment process, and its choice of reporting structures, and it rejected claims about extraterritorial reach or less burdensome alternatives. The decision leaves both rules in effect but requires the SEC to conduct further economic analysis. The original compliance deadlines of January 2, 2026, for Rule 13f-2 and September 28, 2026, for Rule 10c-1a may be delayed.
An appeal appears unlikely given the current composition of the Commission. On September 5, 2025, Chair Atkins released a statement noting that he had asked the Staff to evaluate the rules, make recommendations, including potential changes, and consider the effective dates. See the statement.
*Associate
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