Securities Law Alert: Securities and Exchange Commission to Consider Reinstating the "Upstick Rule"


On Tuesday, March 10, 2009, Rep. Barney Frank, D-Mass., Chairman of the U.S. House of Representatives Financial Services Committee, announced plans to reinstate the "Uptick Rule." The Rule, which appeared as Rule 10a-1 under the Securities Exchange Act of 1934, as amended, mandated that every short sale transaction be entered into at a price that is higher than the price of the previous trade in the stock.1 Established in the wake of the Great Depression, the initial purpose of the Rule was to prevent short sellers from conducting bear raids on companies whose stock prices were falling dramatically, resulting in short sellers being the primary cause of a stock price's rapid decline.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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