SEC Adopts Amendments to Regulation SHO

As we advised in our alert of February 25, 2010, "SEC Adopts New Short Sale Rule," the Securities and Exchange Commission ("SEC") has adopted a short sale circuit breaker rule, under which a security trading on a national securities exchange (a "covered security") whose price has declined by 10% or more from the prior day's closing price may only be sold short for the remainder of that day and the following trading day at an increment above the current national best bid. In a split 3-2 vote, the SEC adopted new Rule 201 and amended Rule 200(g) to better address harmful shortselling practices. The final rule release has been published in the Federal Register,¹ and the new rule becomes effective May 10, 2010, with a compliance date of November 10, 2010.