FINRA Rule 4560, which governs short-interest reporting, requires FINRA member firms to maintain a record of total short positions in all customer and proprietary firm accounts in all equity securities - other than Restricted Equity Securities as defined in Rule 6420 - and to regularly report such information to FINRA.  Short positions to be recorded and reported are those resulting from "short sales," as that term is defined in Rule 200(a) of SEC Reg SHO. FINRA will announce a new effective date in a Regulatory Notice to be published no later than 120 days following Commission approval. The effective date will be no later than 365 days following Commission approval. Rationale for Changes. FINRA currently proposes to amend the Rule to clarify for members their recording and reporting obligations, and to delete several exceptions to the Rule.  FINRA believes these amendments would remove confusion re: the operation of the Rule and help facilitate the availability to the public and regulators of accurate and complete short-interest information.   Here's what FINRA intends to change. Proposed Change #1. FINRA would codify interpretive guidance previously issued by the Intermarket Surveillance Group (ISG) that instructed members to report “gross” short positions existing in each prop and customer account - rather than net positions across accounts. As a result, members must report all gross short positions existing in each firm or customer account, including the account of a broker-dealer, that resulted from a “short sale” transaction as that term is defined in Rule 200(a) of SEC Regulation SHO, as well as where the sale transaction that caused the short position was marked “long,” consistent  with SEC Regulation SHO, due to the firm’s or the customer’s net long position at the time of the transaction (e.g., aggregation units). Proposed Change #2. FINRA would clarify that members’ short-interest reports must reflect only those short positions that have settled or reached settlement date by the close of the reporting settlement date designated by FINRA.  Therefore, short positions resulting from short sales that were effected but have not reached settlement date by the given designated reporting settlement date, should not be included in a member’s short-interest report for that reporting cycle. Of course, short-interest positions resulting from short sales that reached the expected settlement date, but failed to settle (i.e., “fails”), must be included. Proposed Change #3. FINRA would clarify that members must reflect company-related actions in their short-interest reports adjusted as of the ex-date of the corporate action - and if no exdate is declared by an SRO, then the payment date. Therefore, for purposes of short-interest reporting, members must reflect corporate actions - e.g., a reverse or forward split - that impact the total number of shares in the short position in their short-interest report for a reporting cycle if the ex-date of the corporate action occurs by the reporting settlement date designated by FINRA for such  cycle - even if payment of the distribution is not received until after the designated reporting settlement date. Other Proposed Changes. Consistent with discussions with the ISG, FINRA would delete certain existing exceptions to the Rule.  At present, the Rule provides 5 exceptions, including an exception for stabilizing activity, domestic arbitrage and international arbitrage. FINRA, in cooperation with the ISG Short Interest Working Group (“ISG Working Group”), determined that the transactions addressed in these 3 exceptions result in the type of short positions that would be of interest to regulators and the public, and therefore, determined that these exceptions no longer are appropriate. For further details, go to:   [FINRA Rule Filing 12-01, 1/10/12].