Navigating Regulatory Uncertainty: Implications of SEC's Extended Short-Selling and Securities Lending Reporting Deadlines for Asset Managers

The U.S. Securities and Exchange Commission (SEC) has extended compliance deadlines for its short-selling and securities lending reporting rules, creating a complex regulatory landscape for asset managers. Rule 13f-2, which mandates institutional managers to report short positions to the SEC, now has a compliance deadline of February 14, 2026, while Rule 10c-1a, requiring securities lending data to be reported to FINRA, has been pushed to September 28, 2026. These extensions follow a judicial remand by the U.S. Court of Appeals for the Fifth Circuit, which criticized the SEC for failing to assess the cumulative economic impact of the two rules when finalized in October 2023. The court's decision underscores a broader tension between regulatory oversight and market efficiency, leaving asset managers to navigate uncertainty while preparing for potential rule revisions.

Regulatory Context and Compliance Risks

The SEC's original rules aimed to enhance transparency in securities lending and short-selling markets, which are critical to price discovery and liquidity. However, the Fifth Circuit's ruling highlighted that the SEC's analysis of these rules was "arbitrary and capricious" due to their overlapping scope and conflicting disclosure requirements according to regulatory experts. For instance, the Short Sale Rule advocates for aggregated, anonymized, and delayed reporting to protect market integrity, while the Securities Lending Rule mandates granular, immediate reporting of securities loans-a duality that could deter short selling and disrupt market dynamics.

This regulatory ambiguity has already triggered enforcement actions. In 2025, the SEC filed over 90 cases against investment advisers, including a high-profile settlement with FibroGen for misrepresenting clinical trial data. While these actions primarily target misconduct, they signal the SEC's heightened scrutiny of compliance practices. Asset managers now face the dual challenge of adhering to evolving rules while avoiding penalties for noncompliance, particularly as the SEC reevaluates the rules' economic impact.

Strategic Preparedness for Asset Managers

To mitigate risks, asset managers must adopt a proactive approach. First, firms should review internal compliance frameworks to align with the SEC's potential revisions. The Spring 2025 RegFlex Agenda emphasizes modernizing the Custody Rule to address digital assets and streamlining capital formation processes. These initiatives suggest that asset managers should invest in technology to automate reporting workflows and ensure data accuracy. For example, AI-driven tools can help parse complex regulatory requirements and flag discrepancies in real time.

Second, engagement with industry stakeholders is critical. Associations like the National Association of Private Fund Managers (NAPFM), Alternative Investment Management Association (AIMA), and Managed Funds Association (MFA) have challenged the SEC's rules, arguing that inconsistent disclosure requirements harm market efficiency. By participating in these dialogues, asset managers can influence the SEC's recalibration of the rules.

Third, firms should prepare for extended deadlines by building flexibility into their operational timelines. The SEC has indicated it may delay compliance dates further as it reassesses the rules. Asset managers should avoid over-investing in short-term solutions and instead prioritize scalable systems that adapt to regulatory shifts.

Conclusion

The SEC's extended deadlines and judicial scrutiny reflect a broader recalibration of regulatory priorities. While the agency seeks to balance transparency with economic burdens, asset managers must navigate this uncertainty by strengthening compliance programs, leveraging technology, and engaging with industry advocates. As the SEC's final stance remains unclear, preparedness-rather than speculation-will be the key to thriving in this evolving landscape.