SEC finalizes rules against short selling abuse

28 July 2009

The SEC have announced several actions to protect against abusive short sales and make more short sale information available to the public. However, hedge funds will not be required to disclose to regulators details about their short positions.

The SEC have finalized a rule that would require investors to deliver their shares within three days of shorting the stock, or making a bearish bet on a stock. However, Hedge funds will not be required to disclose to regulators details about their short positions.

The SEC has made permanent the temporary Rule 204 that seeks to reduce the potential for abusive "naked" short selling. The rule requires broker-dealers to promptly purchase or borrow securities to deliver on a short sale. The temporary rule, approved by the SEC in the autumn of 2008, was set to expire on July 31.

 

Second, the Commission and its staff are working together with several self-regulatory organizations (SRO) to make short sale volume and transaction data available through the SRO Web sites. This effort will result in a substantial increase over the amount of information presently required by Temporary Rule 10a-3T, which will expire on August 1, applies only to certain institutional money managers and does not require public disclosure.

 

Third, the Commission intends to hold a public roundtable on September 30 to discuss securities lending, pre-borrowing and possible additional short sale disclosures. The roundtable will consider, among other topics, the potential impact of a programme requiring short sellers to pre-borrow their securities, possibly on a pilot basis, and adding a short sale indicator to the tapes to which transactions are reported for exchange-listed securities.

 

Press release

Rule 204: Amendments to Regulation SHO

See also the current SEC consultation on

Proposals on a short sale price test and circuit breaker restrictions

 


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