SEC Extends Short-Selling Orders

The Commission has announced that each of the emergency short-selling orders issued on Sept. 17 and Sept. 18, 2008, will be extended to allow time for completion of work on the anticipated passage of legislation.

Specifically, the emergency orders cover the following:

• Temporary prohibition of short selling in financial companies. This order will be extended beyond its currently scheduled expiration, to allow time for completion of work on the anticipated passage of legislation. It will expire at 11:59 p.m. ET on the third business day after enactment of the legislation, but in any case no later than 11:59 p.m. ET on Oct. 17, 2008.

• Temporary requirement that institutional money managers report to the SEC their new short sales of certain publicly traded securities. This order will also be extended, to 11:59 p.m. ET on Oct. 17, 2008, but the Commission intends that the order will continue in effect beyond that date without interruption in the form of an interim final rule. The Commission will seek comments on all aspects of the anticipated rulemaking. Disclosure under the emergency order will be made only to the SEC.

• Temporary easing of restrictions on the ability of securities issuers to repurchase their securities. This order will be extended beyond its currently scheduled expiration, to 11:59 p.m. ET on Oct. 17, 2008.

Additionally, actions the Commission has taken recently to combat abusive short selling and to increase penalties for naked short selling continue in force following the expiration of the emergency measures. These include:

• Hard T+3 close-out requirement for naked short selling; penalties for violation include prohibition of further short sales without mandatory pre-borrow.
  
  
• Repeal of exception for options market makers from short selling close-out provisions in Regulation SHO.
  
  
• Rule 10b-21 naked short selling anti-fraud rule. The new rule, which became effective at 12:01 a.m. ET on Sept. 18, 2008, covers short sellers who deceive broker-dealers or any other market participants about their intention or ability to deliver securities in time for settlement. The rule makes clear that such persons are violating the law when they fail to deliver.

The Commission's full statement and additional linked materials can be found at: 

http://www.sec.gov/news/press/2008/2008-235.htm