On February 24, 2010, the SEC adopted changes to the rules regarding short-selling under the 1934 Act, by imposing a restriction on the prices at which securities traded on a national securities exchange (other than options) may be sold short. In a short sale transaction, a seller borrows a stock and sells it, with the understanding that the loan will be repaid by the seller by buying the stock on the open market. Pursuant to the amendments to Regulation SHO, a trading center must implement written policies and procedures reasonably designed to prevent the execution or display of a short sale order for a particular security at a price that is less than or equal to the current national best bid, if the price of that security has decreased by 10% or more from the prior day’s closing price. Once the “circuit breaker” is triggered, this price test will remain in effect for the remainder of the trading day and the following day. The amendments also facilitate the ability of long sellers of the affected security to sell their shares before short sellers may do so, and further short sales are permitted only when the price of the security is above the current national best bid.

The amendments will become effective 60 days after their publication in the Federal Register, and market participants will then have six months to comply with the rules.