The Securities and Exchange Commission has issued emergency orders relating to short sales and issuer repurchases designed to protect the integrity and quality of the securities markets and strengthen investor confidence. The emergency orders are effective as of September 19, 2008 and will terminate at 11:59 p.m. eastern time on October 2, 2008 (the "Order Period"). The Commission may extend the orders if it considers an extension necessary in the public interest and for the protection of investors, but will not extend the orders for more than 30 calendar days of total duration.

Short Sales 

The Commission's orders prohibit any short selling in the stocks of 799 financial services companies. Earlier this week the SEC limited "naked" short sales. Today's order completely bars any short selling in the identified financial institutions through October 2, 2008. A separate order temporarily requires institutional money managers to report their new short sales of publicly traded securities (not just financial institution stocks) unless the short position represents less than 0.25% of the outstanding class of an issuer's securities and the fair market value of the short position is less than $1,000,000. These institutions are already required to report their long positions in these securities. The short sales are required to be reported on a new Form SH that accompanies the emergency order. These actions are contained in two SEC emergency orders: Emergency Order, Release No. 34-58592 and Emergency Order, Release No. 34-58591, which are available on the Commission's website at

Issuer Repurchases

Exchange Act Rule 10b-18 provides issuers with a safe harbor to effect repurchases of their own securities. The safe harbor includes limits on the manner, time, price and volume of purchases. Historically, most issuers have been reluctant to effect repurchase programs without the certainty that their repurchases come within the safe harbor. The Commission's emergency order alters the safe harbor limitations on the timing and volume of purchases to provide additional flexibility and certainty to issuers executing repurchases during the current market conditions.

The Emergency Order modifies the timing and volume conditions of Rule 10b-18 for purchases made during the Order Period as follows:

Timing of Purchases

Original rule: Purchases by the issuer must not constitute the opening transaction and no purchases may be effected during the last 10 minutes prior to the scheduled close of trading.

Temporary Rule: The time of purchase condition is suspended so that purchases can be made at any time.

Volume of Purchases 

Original Rule: The aggregate volume of Rule 10b-18 purchases by the issuer on any day may not exceed 25% of the issuer's average daily trading volume (ADTV) for the securities during the four calendar weeks preceding the week of the purchase. The rule also allows an issuer to make one block purchase per week in lieu of purchases under the ADTV limit.

Temporary Rule: The aggregate volume limitation has been increased to 100% of ADTV. The block purchase exception is retained.

The remaining conditions of Rule 10b-18, including the manner of purchase and the price of purchases, are not altered by the temporary rules and must be satisfied for an issuer to fall within the rule's safe harbor protection.