Thursday, April 9, 2009

SEC Solicits Comments on Short-Selling Rules

Yesterday, the SEC introduced two approaches to curtail short-selling, which some lawmakers and executives have blamed for deepening the financial crisis. One approach would impose a market wide and permanent restriction on short-selling, while the other would limit sales of a particular security if that security's price is severely down on a specific day. The SEC proposals for permanent restrictions include (1) a reinstatement of the "uptick rule" or (2) a modified "uptick rule" allowing short-selling only if the best available bid was higher than the last bid (the "bid test"); while the proposed temporary approaches would implement circuit breakers that would (1) initiate the "bid test" if a stock fell by 10% (or a certain other percentage), (2) ban short-selling for a particular stock for the rest of the day, if the stock fell by a certain percentage, or (3) institute the "uptick rule" for that stock for the rest of the day, once triggered by a certain percentage drop in a particular stock.

The SEC announced a roundtable discussion of the issues surrounding these proposals to take place on May 5th, 2009. Once issued, the various proposals will be subject to a 60-day public comment period.

SEC Press Release

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New York to Offer Pre-Approved Charters to Boost Bidders for Weak Banks

As reported by Reuters, New York State regulators intend to offer so called "shelf charters" to non-bank entities such as private equity firms in order to encourage bids on failed banks in Federal Deposit Insurance Corp ("FDIC") auctions.

Link

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