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ARTICLE · 13 OCTOBER 2008

SEC Issues Emergency Rules Regarding Short Selling And Stock Repurchases

Foley & Lardner LLP
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In an effort to increase public confidence in the market, on September 17 and 18, 2008, the U.S. Securities and Exchange Commission (SEC) promulgated new emergency rules that strengthen the ban on naked short selling, temporarily halt short selling in financial stocks, temporarily require money managers to report new short sales, and temporarily ease existing restrictions on issuers repurchasing their securities.

United StatesFinance and Banking
Foley & Lardner
Foley & Lardner
John Wolfel, Jr.
John Wolfel, Jr.
Michael Kirwan
Michael Kirwan
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In an effort to increase public confidence in the market, on September 17 and 18, 2008, the U.S. Securities and Exchange Commission (SEC) promulgated new emergency rules that strengthen the ban on naked short selling, temporarily halt short selling in financial stocks, temporarily require money managers to report new short sales, and temporarily ease existing restrictions on issuers repurchasing their securities. The new rules become effective between Thursday, September 18, 2008 and Monday, September 22, 2008. Despite strong comments from Congress, the SEC has not reinstituted the uptick rule for short-sale transactions.

Background Information on Naked Short Selling

In an ordinary short sale, a short seller borrows a stock and sells it. The borrowed stock is then repaid in the future by buying the stock in the market. In a naked short-sale transaction, the seller does not actually borrow the stock and fails to deliver it to the buyer. This failure to obtain the

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