The Securities and Exchange Commission extended certain aspects of recent short sale emergency orders to allow time for completion of work on the anticipated passage of the “financial rescue” legislation currently working its way through Congress. The SEC’s temporary ban on short selling in certain enumerated financial companies will extend to the third business day after enactment of the “financial rescue” legislation but in any case no later than 11:59 p.m. ET on October 17. The temporary requirement that certain institutional money managers (i.e., “13F filers”) make reports regarding new short sale activity in certain publicly traded securities was also extended to 11:59 p.m. ET on October 17; however, the SEC signaled its intention to extend the disclosure requirements beyond that date through an interim final rule (that will provide an opportunity for industry comment). Further, the SEC extended its order temporarily easing restrictions on the ability of issuers to repurchase their securities to 11:59 p.m. ET on October 17.
The SEC also announced an extension of certain provisions relating to the existing ban on naked short selling. The “Hard T+3” close-out requirements from a previous order (including the prohibition of further short sales without a pre-borrow for firms that are in the “penalty box”) were extended until 11:59 p.m. ET on October 17. However, the SEC made clear that it intends to adopt interim final rules to ensure these “Hard T+3” close-out rules extend past the October 17 date without interruption. These interim final rules will provide an opportunity for industry comment on this initiative.