March 15, 2024 | News

Five economists that formerly led the SEC office known as the Division of Economic and Risk Analysis filed a request with the Fifth Circuit to correct two recent agency rules aiming to bring transparency to the short-selling market. The Amici included Jeffrey Harris, S.P. Kothari, Craig Lewis, Jim Overdahl, and Chester Spatt.

On October 13, 2023, the Commission finalized two rules to increase transparency in securities lending and short selling. The first mandated daily reporting of securities loans to FINRA, while the second required investment managers to report short sale positions to the Commission for monthly publication. Public commenters and the Petitioners emphasized the necessity of aligning the two rules, particularly regarding their disclosure timelines. Additionally, the commenters highlighted inconsistencies in the economic analyses of the rules.

The Amici's brief discusses that the Commission failed to follow its usual processes and best practices in its rulemakings because it departed from its practices of addressing comments, did not reconcile contradictions, and did not conduct an economic analysis of the interrelated rules. 

The brief was submitted on March 12, 2024 in No. 23-60626, National Association of Private Fund Managers; Managed Funds Association; Alternative Investment Management Association v. Securities and Exchange Commission. A full version of brief is available at the link below. 

Former SEC economist Jeffrey Harris is currently the Gary Cohn Goldman Sachs Endowed Chair in Finance at the Kogod School of Business at American University where he teaches finance courses and directs the Student Managed Investment Fund. Vega recent supported Prof. Harris in a CME arbitration involving Treasury futures calendar spreads. As part of his assignment, he discusses price discovery and market making in financial markets, provides an economic and regulatory view of relevant CME rules, as well as dissects the nature and impact of at-issue events. 

Brief of Former SEC Chief Economists as Amici Curiae in Support of Petitioners