This paper aims to provide a detailed description of the four releases issued by the US Securities and Exchange Commission (the “SEC”) on October 14 and 15, 2008 in connection with the three SEC emergency orders that were adopted on September 17 and 18, 2008, relating to the regulation of short selling.
The paper presents a general overview of: Interim Final Temporary Rule 204‐T; Interim Final Temporary Rule 10a‐3T; the Amendments to Regulation SHO; and the Final Rule 10b‐21, each regulating short selling; and highlights each rule's new requirements, the exceptions to those requirements, and the material differences between the new rules and the rules as they were originally adopted.
The Interim Temporary Rules, the Amendments to Regulation SHO and the Final Rule 10b‐21 are important because: Interim Final Temporary Rule 204‐T imposes a penalty on any “participant” of a “registered clearing agency”, as defined below, and any associated broker‐dealer for having a fail‐to‐deliver position at a registered clearing agency in any equity security; Interim Final Temporary Rule 10a‐3T requires certain institutional investment managers to file a new form with the SEC on the last business day of every calendar week subsequent to the manager effecting a short sale; the Amendments to Regulation SHO eliminate the “options market maker exception” from Regulation SHO's close‐out requirement; and Final Rule 10b‐21 prohibits any person from intentionally deceiving a broker‐dealer, or a buyer as to the intention or ability of that person to deliver shares on the settlement date. Each of these actions creates new day‐to‐day compliance responsibility for market participants generally and for US‐registered broker‐dealers in particular.
The paper provides expert guidance on recent SEC releases by experienced securities lawyers.
