SEC and FSA Take Actions Against Short Selling
Cary J. Meer, Christina E. Anzuoni, Manjinder Cacacie, Kay A. Gordon, Mark D. Perlow
K&L Gates, 19 September 2008
On September 17 and 18, 2008, in a series of emergency measures, the Securities and Exchange Commission (“SEC”) adopted two new rules, issued two orders (including a temporary ban on short sales in financial securities), amended Regulation SHO and Rule 10b-18, and announced enforcement initiatives aimed at preventing “naked” short selling and compelling disclosure of short positions. In the view of the SEC, but not of all observers, “naked” short selling and other manipulative trading practices have contributed to the recent turmoil in the markets and sudden declines in securities prices, particularly in the financial sector. “Naked” short selling is the practice of selling a security short without having borrowed the security.
