SEC Chairman Paul S. Atkins announced on September 5, 2025, that he has tasked agency staff with reviewing the SEC’s landmark transparency rules following a recent decision by the U.S. Court of Appeals for the Fifth Circuit. While the Court upheld the substance of the Securities Lending Rule (Rule 10c-1a) and the Short Sale Rule (Rule 13f-2), it remanded them to the agency to correct a flaw in its economic analysis. The move, which keeps the rules legally intact, now puts their future implementation timeline in question.
The Chairman’s Directive
The court’s decision faulted the SEC for failing to properly consider the cumulative economic impact of the two highly interrelated rules, which were adopted during the same meeting on October 13, 2023. In his public statement, Chairman Atkins instructed his staff to address the court’s findings directly.
“I have directed Commission staff to evaluate the rules in light of the opinion and make recommendations for appropriate Commission action, including potential changes to the rules and adjustments to the related compliance dates.”
This directive initiates a process that will likely result in a delay in implementing Rule 10c-1a, which aims to enhance transparency in the securities lending market.
The Fifth Circuit’s ruling was narrow and focused specifically on the SEC’s economic analysis. The court criticized the agency’s approach of analyzing the economic impacts of the rules sequentially, rather than collectively, describing it as a “short-cutting fiction” and a “regulatory sleight of hand.” The agency had contended that since the Short Sale Rule was still a “proposed rule” when the Securities Lending Rule was finalized shortly before, it did not need to be included in the economic baseline of the latter. However, the court deemed this reasoning “irredeemably illogical.”
Crucially, however, the court denied all other challenges brought by the petitioners, which included claims that the SEC exceeded its statutory authority or failed to provide adequate public comment periods. By remanding the rules without vacating them, the court signaled its belief that the procedural error is curable and that the agency can “substantiate its decision given an opportunity to do so.” This outcome strongly suggests that the core tenets of the rules have survived the legal challenge.
The Path Forward: No Substantive Changes Expected
Given that the Fifth Circuit upheld the substance of the rules and the SEC’s authority to create them, it is almost certain that the staff’s review will not result in significant substantive changes to Rule 10c-1a or Rule 13f-2. The court’s remand is a clear directive to revise the economic analysis, not to rewrite the regulations themselves.
The process required to comply with the court’s order is multi-staged and will inevitably delay implementation. As we outlined in a recent blog post, the SEC staff will need to:
- Conduct a New Analysis: SEC economists must now model the combined costs and benefits of both rules operating simultaneously17.
- Issue a Release and Reopen Comments: The agency will have to publish its new cumulative analysis and allow the public to provide feedback on the revised assessment18.
- Finalize the Rules (Again): After the comment period, the SEC must formally re-adopt the rules with the strengthened economic justification19.
This lengthy process makes meeting the current compliance deadlines for Rule 10c-1a unfeasible. The deadlines, which were already extended once by a temporary exemptive order, currently require covered persons to begin reporting securities lending data to FINRA on September 28, 2026, with FINRA to begin public dissemination on March 29, 2027. A formal postponement is now almost certain as the SEC works to build a more legally durable record for the rules.