7.27.2009 The SEC adopted new rules governing short sales. In its adopting release, the SEC stated that it is finalizing amendments to Regulation SHO under the Securities Exchange Act of 1934 (Exchange Act) by making permanent amendments contained in Interim Final Temporary Rule 204T, with some modifications to address commenters’ concerns. The amendments are intended to help further the SEC’s goal of reducing fails-to-deliver by maintaining the reductions in fails-to-deliver achieved by the adoption of temporary Rule 204T, as well as other actions taken by the SEC. In addition, the SEC states that amendments are intended to help further its goal of addressing abusive “naked” short selling in all equity securities.
The new regulations will require that, subject to certain limited exceptions, if a participant of a registered clearing agency has a fail-to-deliver position at a registered clearing agency, it must immediately purchase or borrow securities to close out the position by no later than the beginning of regular trading hours on the settlement day following the day the participant incurred the fail-to-deliver position. Failure to comply with the close-out requirement of the final rule is a violation. In addition, a participant that does not comply with this close-out requirement, and any broker-dealer from which it receives trades for clearance and settlement, will not be able to short sell the security either for itself or for the account of another.
Click http://www.sec.gov/rules/final/2009/34-60388.pdf to access the SEC adopting release.