SEC Extends Order Limiting Naked Short Selling Through August 12

FOR IMMEDIATE RELEASE
2008-155

Washington, D.C., July 29, 2008 — The Securities and Exchange Commission today extended an order issued July 15 to enhance investor protections against naked short selling in the securities of financial institutions to which the Federal Reserve has granted temporary access to liquidity facilities on an emergency basis. The extended order will be in effect until 11:59 p.m. EDT on Aug. 12, 2008, and will not be further extended.

The Commission's decision to extend the order for a second 10-day period, in addition to furthering the purposes of the original order, will permit the Commission staff to collect and analyze additional data on the impact and effect of the order's provisions. Following expiration of the extended order, the Commission will proceed immediately to consideration of rulemaking which would become effective after public notice and comment. The purpose of the rulemaking is to provide additional protections against abusive naked short selling in the broader market, while allowing the legitimate short selling essential to efficient, highly liquid markets.

The SEC’s order requires short sellers in the securities of the designated institutions to arrange to borrow the securities at the time of sale so that the buyers will receive the stock they purchased on time. Selling short without borrowing the stock to be sold, and failing to deliver it, is called naked short selling.

“The order is designed to protect legitimate short selling in these securities, but helps prevent illegitimate naked short selling and potential ‘distort and short’ manipulation,” said SEC Chairman Christopher Cox. “In addition to continuing the existing order against naked short selling, the Commission will continue exploring other remedies for the broader marketplace to further protect investors from ‘distort and short’ artists.”

Chairman Cox recently reported to the Congress that the Commission will soon consider rulemaking to apply additional protections against abusive naked short selling to the broader market.

The Commission’s order was issued under its emergency authority provided in Section 12(k)(2) of the Securities Exchange Act of 1934. The Act limits emergency orders to 10 business days. The total duration of the original order plus extensions may not exceed 30 calendar days from the date of the original order.

http://www.sec.gov/news/press/2008/2008-155.htm