On August 17, the SEC announced that it was reopening the comment period for its proposed rules to restrict short selling specifically to solicit feedback regarding an alternative uptick test to the methods initially proposed.

Earlier this year, the SEC published proposed rules containing five alternate methods to restrict short selling. Under two of the five alternatives, short sales would only be permitted at a price that is at the current national best bid. The SEC is now seeking comments on whether it should only permit short sales at a price that is above the current national best bid.

The proposed restrictions arose from a concern that elimination of the "uptick rule" in July 2007 had contributed to rapid declines in stock prices of US financial institutions and, in some cases, ultimately led to their demise.

Click here for an expanded client alert on the SEC's new proposed uptick test.

Proposed Rule: available here (PDF)

Related Alert: SEC Proposes Alternative Approaches to Restrict Short Selling (April 24, 2009) (PDF)

SEC Press Release: SEC Seeks Comment on Alternative Uptick Rule (August 17, 2009)