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Industry trade groups AIMA and the MFA are suing the Securities and Exchange Commission (SEC) over new rules requiring greater reporting and public disclosure of securities loans and short selling activity.
The National Association of Private Fund Managers (NAPFM) is also behind the lawsuit, which asks the US Court of Appeals for the Fifth Circuit to invalidate two recently adopted rules.
AIMA said in a statement that the rules would apply contradictory and incoherent approaches to two aspects of the same underlying transaction: the short sales themselves and the loans of securities to facilitate those short sales.
The petitioners argue the rules are arbitrary and capricious under the Administrative Procedure Act and run counter to the SEC’s stated mission to protect investors and maintain fair, orderly, and efficient markets.
“These two rules underscore how the SEC has ignored calls from industry, market participants, and Congress to consider the interconnectedness and aggregate impact of its rulemakings,” said AIMA CEO Jack Inglis.
“The rules will impair market efficiency and price discovery and harm market participants and investors. The SEC should instead take into account their connected nature and apply consistent reporting and disclosure frameworks for these positions, which are designed to protect both market efficiency and market participants.”