Fifth Circuit Remands SEC Securities Lending and Short Position Reporting Rules

On August 25, 2025, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit issued an opinion in National Association of Private Fund Managers v. SEC,¹ remanding without vacatur Exchange Act Rule 10c-1a (Rule 10c-1a or the Securities Lending Reporting Rule) and Rule 13f-2 (Rule 13f-2 or the Short Position Reporting Rule) to the U.S. Securities and Exchange Commission (Commission or SEC) to further consider their cumulative economic impact.

Both rules now head back to the Commission, where their futures are uncertain.

Background

On October 13, 2023, the SEC finalized two rules intended to increase transparency in the securities lending and short sale markets, both of which had been long-outstanding mandates under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), enacted following the 2008 financial crisis.

• Rule 10c-1a (Reporting of Securities Loans): The rule requires persons entering into covered securities loans (or their intermediary or reporting agent, where applicable) to report specific terms of the loan to the Financial Industry Regulatory Authority (FINRA) Securities Lending and Transparency Engine on the same day the loan is either effected or modified. FINRA is then required to make publicly available certain transaction-specific information, as well as certain aggregate data, within prescribed timeframes (generally, by the morning of the next business day).

• Rule 13f-2 (Short Position and Short Activity Reporting by Institutional Investment Managers): The rule requires institutional investment managers to report to the SEC’s EDGAR system extensive information on certain “large” short positions and associated daily short sale activity on a monthly basis, which the SEC would then use to make publicly available aggregate data about short positions and short sale activity in individual securities.

The Commission adopted Rule 10c-1a first, followed shortly thereafter by Rule 13f-2 at the same open meeting. However, while the SEC’s economic analysis in the adopting release for Rule 13f-2 considered the economic impact of Rule 10c-1a, the economic analysis in the adopting release for Rule 10c-1a did not mention Rule 13f-2 on grounds that the Short Position Reporting Rule “remain[ed] at the proposal stage.”² As a result, the rules, taken together, did not fully assess how each might affect the other.

On December 12, 2023, several industry associations challenged the adoption of both rules under the Administrative Procedure Act (APA), arguing that (i) the Securities Lending Reporting Rule exceeded the scope of the SEC’s statutory authority; (ii) the SEC did not afford adequate opportunity for public comment on the final Securities Lending Reporting Rule; (iii) the Short Position Reporting Rule had an impermissible extraterritorial application; (iv) the SEC did not reasonably explain why it had not chosen a less burdensome reporting regime for the Short Position Reporting Rule; (v) the SEC did not sufficiently justify the Securities Lending Reporting Rule and Short Position Reporting Rule’s different reporting approaches; and (vi) the SEC failed to assess the cumulative economic impact of the Securities Lending Reporting Rule and the Short Position Reporting Rule.

The Fifth Circuit’s Decision

In its August 25 decision, the panel held that the Commission’s failure to consider the collective economic impact of the Securities Lending Reporting Rule and Short Position Reporting Rule was arbitrary and capricious. In particular, the court found unconvincing the SEC’s position that because Rule 10c-1a was adopted first, it did not need to account for Rule 13f-2 in its economic analysis, calling the approach a “short-cutting fiction.”³ Accordingly, the court remanded the rules to the Commission without vacatur⁴ “to allow the agency to consider and quantify the cumulative economic impact of the Rules, consistent [the court’s] opinion.”⁵

The court, however, made a point to “emphasize the limited nature of [its] holding” and rejected the other arguments raised by the petitioners against the adoption of Rule 10c-1a, the adoption of Rule 13f-2, and the conflicting reporting approaches under the two rules.⁶

What This Means to You

• An Appeal by the SEC May Be Unlikely. The rules are still technically in effect, but it is not yet clear how the SEC plans to proceed in light of the Fifth Circuit’s decision. The SEC has not indicated whether it will appeal the decision to the Fifth Circuit en banc or to the Supreme Court, although such an appeal is presumably unlikely given the change in political composition of the Commission since the original adoption of the rules under former Chairman Gary Gensler. Indeed, the two Republican commissioners who dissented from the adoption of Rules 10c-1a and 13f-2 — Commissioners Hester Peirce and Mark Uyeda — now sit in the majority with Chairman Paul Atkins, casting doubt on the Commission’s appetite to devote significant resources toward a lengthy appeal process.

• The SEC’s Path Forward Is Uncertain. The rules are now back with the SEC for further consideration. In a statement following the Fifth Circuit’s decision, a spokesperson for the SEC said, “As Chairman Atkins has previously stated, SEC rulemaking must take into account a thorough cost-benefit analysis.”⁷ This may indicate that the Commission plans to proceed with a republication of the rules for public comment to include an economic analysis that complies with the Fifth Circuit’s opinion. Market participants should monitor how the SEC proceeds in responding to the court’s decision.

• Implementation Timelines May Shift. Firms preparing for compliance with the securities lending and short sale reporting frameworks should recognize that the SEC may alter compliance dates while it conducts the required cumulative economic analysis or takes other action in response to the Fifth Circuit’s decision. As of the publication date of this Sidley Update, it is unclear how the SEC plans to address the January 2, 2026, reporting date for Rule 13f-2 and the September 28, 2026, reporting date for Rule 10c-1a. Firms should monitor for any updates from the SEC in the coming days regarding these deadlines.

• Renewed Opportunities for Industry Input. The Fifth Circuit panel stated that it was remanding the rules “to allow the Commission to analyze their cumulative economic impact and respond[] to further comments.”⁸ This suggests that stakeholders may now have additional opportunities to engage with the SEC on recommended approaches for balancing the rules’ transparency objectives with their cost and competitive impact.

For guidance or to discuss potential effects on your firm, please contact the Sidley team.

¹ No. 23-60626 (5th Cir. Aug. 25, 2025), available at https://www.ca5.uscourts.gov/opinions/pub/23/23-60626-CV0.pdf.

² See Adopting Release, Reporting of Securities Loans, Release No. 34-98737, 88 FR 75644, 75695 (Nov. 3, 2023).

³ Id. at 23. The court pointed to the fact that the two rules are “highly interrelated [and were] enacted contemporaneously during the same open meeting” and noted that the siloed approach taken by the Commission with respect to Rules 10c-1a and 13f-2 “goes against the Commission’s prior practice [of] often treat[ing] related rules as adopted concurrently and factor[ing] them into each other’s economic analysis.” Id. at 23, 26. The court also noted that comment letters submitted to the SEC by, among others, Managed Funds Association and the National Association of Private Fund Managers had urged the Commission to consider the cumulative costs and benefits of its rulemakings. Id. at 26, 28.

⁴ “Remand without vacatur is a judicial remedy that permits agency orders or rules to remain in effect after they are remanded by the reviewing court for further agency proceedings.” Admin. Conf. of the U.S., Remand Without Vacatur (Dec. 5, 2013), https://www.acus.gov/document/remand-without-vacatur.

⁵ Id. at 29.

⁶ The court rejected the argument that the SEC exceeded its statutory authority with respect to Rule 10c-1a, finding that Section 984(b) of the Dodd-Frank Act expressly authorized the Commission to promulgate rules “to increase the transparency of information available” about securities lending. Nat’l Ass’n of Priv. Fund Managers v. SEC, No. 23-60626, 3 (5th Cir. Aug. 25, 2025). The court also rejected the claim that the SEC failed to provide adequate notice and opportunity for public comment on the final Securities Lending Reporting Rule, finding that the Commission did “all the APA demands” by considering the public’s input and modifying the final rule to incorporate feedback from commenters. Id. at 13.

Further, the court rejected the argument that the Commission failed to reasonably explain why it did not use a less burdensome alternative to reporting Rule 13f-2 information on Form SHO through EDGAR (e.g., relying instead on information collected through FINRA’s existing short interest reporting infrastructure), stating that “even if Petitioners are correct that FINRA’s is the better system,” the APA requires only that the SEC considered the relevant issues and addressed all relevant factors raised by the public comments. Id. at 15. The court also found that Rule 13f-2’s extraterritorial scope was not excessive, finding sufficient evidence in the adopting release that the rule had “the same, domestic, parameters” as Regulation SHO. Id. at 17.

With respect to the petitioners’ argument that the Securities Lending Reporting Rule and the Short Position Reporting Rule took irreconcilably contradictory approaches to their reporting because the first would publish transaction-specific information on a daily basis while the second would publish aggregated, anonymized data on a monthly basis, the court found that Congress’s choice to address the regulation of securities lending and of short interest reporting via two separate statutes “was deliberate,” rejecting the petitioners’ argument that securities loans are “direct proxies” for short sales. Id. at 9, 20.

⁷ Jessica Corso, 5th Circ. Nixes SEC’s Biden-Era Short-Selling Rules, LAW360 (Aug. 25, 2025), https://www.law360.com/securities/articles/2380624?nl_pk=c09de5ab-5bb1-481b-83bf-4f0702986bf3&utm_source=newsletter&utm_medium=email&utm_campaign=securities&utm_content=2025-08-26&read_main=1&nlsidx=0&nlaidx=0.

⁸ Id. at 29 (emphasis added).