SEC Adopts Restrictions On The Short Selling Of Stocks That Experience Sharp Price Declines

Wilson Sonsini Goodrich & Rosati
Contact

On February 24, 2010, the Securities and Exchange Commission (SEC) adopted a new rule that will limit the short selling of any stock that has declined in price by more than 10 percent in one day. In those circumstances, short sales will be permitted in a stock only if the price exceeds the current national best bid. The SEC stated that the purpose of adopting a short-sale-related “circuit breaker” was to prevent short selling from further driving down the price of the stock and to enable long sellers to be able to sell their shares prior to short sellers once the circuit breaker is triggered. The new Rule 201, an amendment to existing Regulation SHO, was adopted by a 3-2 vote of the SEC commissioners, with the dissenting commissioners arguing that Rule 201 was not necessary and could impair the proper functioning of the financial markets. In adopting Rule 201, the SEC reinstated a limited version of price restrictions on short sales that it had discarded only three years ago as antiquated and ineffective.

Please see full publication below for more information.

LOADING PDF: If there are any problems, click here to download the file.

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.

© Wilson Sonsini Goodrich & Rosati | Attorney Advertising

Written by:

Wilson Sonsini Goodrich & Rosati
Contact
more
less

Wilson Sonsini Goodrich & Rosati on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide