SEC Will Require Disclosure of Hedge Fund Short Positions

SEC Chair Christopher Cox will ask the Commission to consider on an emergency basis a new disclosure rule requiring hedge funds and other large investors to disclose their short positions. Prepared by the staffs of the Divisions of Investment Management and Corporation Finance, the new rule will be designed to ensure transparency in short selling. Hedge fund managers with more than $100 million invested in securities would be required to promptly begin public reporting of their daily short positions. The managers currently report their long positions to the SEC.
At the same time, the Division of Enforcement will expand its ongoing investigations by undertaking a series of additional enforcement measures against market manipulation. The Enforcement Division will obtain disclosure from significant hedge funds and other institutional traders of their past trading positions in specific securities. Those institutions will also be required immediately to secure all of their communication records in anticipation of subpoenas for these records. Director of Enforcement Linda Chatman Thomsen emphasized that the SEC has been investigating and will continue to investigate any suggestion of manipulative trading; and will use every weapon in its arsenal to combat market manipulation that threatens investors and capital markets.

Chairman Cox has consistently emphasized that hedge funds are subject to SEC regulations and enforcement under the antifraud, civil liability, and other provisions of the federal securities laws. The SEC will continue to vigorously enforce the federal securities laws against hedge funds and hedge fund advisers who violate those laws.