Orical: US SEC Form SHO does not require foreign equity short sales reporting

Form SHO reporting does not require the reporting of foreign equity short sale transactions. As such, New York-headquartered Orical recommended that investment advisers limit the reporting of short sales on Form SHO to domestic United States equity transactions, the law firm wrote in an emailed notice.
However, foreign equities listed on US exchange are required to be reported on Form SHO (e.g. ADRs and foreign issuers).

The US Securities and Exchange Commission (SEC) wrote in a court brief that there is no intention to apply the Short Sale Rule to short sales of foreign securities traded on foreign exchanges: the rule applies only to Managers that effect US short sale transactions in equity securities subject to Regulation SHO, and thus is limited to domestic transactions.

The court brief says: “And petitioners misread the rule in arguing that it has an impermissible extraterritorial reach, because the rule applies only to Managers that effect US short sale transactions in equity securities subject to Regulation SHO, and Regulation SHO applies only to domestic transactions.”

In the Brief, the SEC explicitly stated “[j]ust as Regulation SHO does not apply to securities transactions effected outside the United States, neither does the Short Sale Rule,” exempting non-US, foreign issuers from any Form SHO reporting.

The Form SHO Adopting Release suggested that the SEC expected institutional managers to report short sales of foreign securities that occur outside of the United States: “Transparency regarding short selling by Managers of securities of US and non-US issuers is important regardless of where those sales occur.”

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