The Securities and Exchange Commission is adopting amendments to Regulation SHO that eliminate its grandfather provision and revise the close-out requirement for aged fails to deliver in threshold securities and sales of stock under Rule 144.

Regulation SHO defines a threshold security as an equity security for which there is an aggregate fail to deliver position for five consecutive settlement days at a registered clearing agency of 10,000 shares or more and that is equal to at least 0.5% of the issuer’s total shares outstanding. Fails to deliver in threshold securities on the date an issue becomes a threshold security must be closed out within 13 consecutive settlement days. This includes fails to deliver arising both before and after the issue becomes a threshold security. However, fails in threshold securities on the date the amendment becomes effective (estimated as early to mid October 2007) will be allowed to be closed out within 35 consecutive settlement days. The SEC also amended Rule 203 of Regulation SHO to extend the close-out requirement to 35 consecutive settlement days for fails to deliver resulting from sales of threshold securities pursuant to Rule 144 of the Securities Act of 1933.