- SEC delays short-selling disclosure rules, giving hedge funds years more to hide bets and avoid transparency.
- Commissioner Crenshaw blasts the extension as “repeal by extension,” accusing the SEC of siding with Wall Street over retail investors.
Washington — Just when it seemed like Wall Street might finally have to come clean on its short-selling secrets, the U.S. Securities and Exchange Commission has hit the snooze button again.
For the second time this year — and arguably the third delay overall — the agency has pushed back a controversial set of disclosure rules aimed at shining a light on hedge funds’ bets against stocks.
The move, announced Wednesday, gives big investors nearly three more years to get their act together, but it’s already drawing sharp criticism from within the SEC itself.
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At the heart of the delay are rules finalized back in October 2023, designed to pull back the curtain on short selling — a practice that’s as old as the markets themselves but has drawn intense fire in recent years.
Dissecting The Root of the Issue
Remember the 2008 financial meltdown, when short sellers were blamed for piling on the pain?
Or the wild 2021 saga with meme stocks like GameStop, where retail traders squared off against Wall Street’s biggest guns?
Those episodes turned short selling into a lightning rod, prompting retail investors to demand more transparency from regulators after squeezes were suppressed.
Under the original plan, hedge funds and other major investment managers would have to report their short positions on a monthly basis.
That’s not all: Pension funds, banks, and institutional lenders would need to disclose stock-lending transactions — essentially the behind-the-scenes deals that fuel short bets — the very next day.
The goal? Give regulators and the public a clearer picture of who’s betting against what, potentially heading off market manipulations before they spiral.
But implementation has been anything but smooth.
Trade groups like the Managed Funds Association and the Alternative Investment Management Association fired back almost immediately, hauling the SEC into court.
Their argument: The rules were overreach, inconsistent with existing laws, and ignored the massive economic ripple effects.
The Industry Fights Back
In August, a three-judge panel from the 5th U.S. Circuit Court of Appeals sided with the industry, ruling that the SEC hadn’t properly weighed the costs.
The court didn’t outright kill the rules — it just told the agency to go back to the drawing board and think harder about the fallout.
Enter Wednesday’s order from the SEC, which effectively buys everyone more time.
Investment managers now have until January 2, 2028, to start reporting short sales.
Stock lenders get a slightly longer leash, with a deadline of September 28, 2028.
In its formal statement, the commission justified the extensions by saying, “The Commission finds these temporary exemptions to be necessary in the public interest and consistent with the protection of investors.”
On the surface, it’s a pragmatic pause — a chance for the SEC to refine the rules in light of the court’s feedback.
But not everyone’s buying the olive branch.
SEC Commissioner Caroline A. Crenshaw, the agency’s only Democrat, dropped a blistering dissent that reads like a warning shot across the bow.
She slammed the delay as “repeal by extension,” accusing the majority of using procedural tweaks to indefinitely sideline reforms.
“Under the guise of compliance date extensions, we are attempting to camouflage a new willingness to repeatedly bend the rules until they break — eroding the rule of law,” Crenshaw wrote in her statement.
She argued that the court’s directive was narrow — just a nudge to reconsider economic impacts — not a green light to abandon the effort altogether.
This isn’t the first postponement, either.
The SEC Fails the Average American Investor Yet Again
The SEC already nudged the deadlines earlier this year amid the brewing legal storm, but Wednesday’s announcement stretches the timeline further than ever.
For industry insiders, it’s a breather: No scrambling to overhaul reporting systems just yet, and more time to lobby for carve-outs.
Hedge fund managers, who often operate in the shadows of complex derivatives and loans, can keep their strategies under wraps a while longer.
Critics, though, see it as yet another win for the powerful.
Short selling isn’t inherently evil — it can signal overvalued stocks and provide liquidity — but without disclosures, it’s hard to tell if it’s being used to manipulate prices or squeeze smaller players.
The meme stock frenzy exposed those fault lines vividly, with everyday investors accusing short sellers of colluding to tank prices.
Will this extended delay erode trust further, or does it give the SEC a real shot at crafting bulletproof rules?
As the agency mulls its next steps, one thing’s clear: The battle over short-selling transparency is far from over.
With a divided commission and a watchful court, 2026 could bring more twists.
For now, Wall Street breathes easier — but the clock is still ticking, just a lot slower.
Also Read: Short Sellers Are Now Throwing One Another Under the Bus
