SEC Criticized by US Chamber
SEC Criticized For Delaying Short-Selling ChangesBy Judith BurnsOf DOW JONES NEWSWIRES459 words29 March 200712:30Dow Jones News ServiceEnglish(c) 2007 Dow Jones & Company, Inc.WASHINGTON (Dow Jones)--
The U.S. Securities and Exchange Commission iscoming under criticism for delaying action on persistent problemsinvolving short selling abuses, an area where SEC Chairman ChristopherCox has said existing rules have been inadequate.The SEC announced this week that it is reopening the public commentperiod on changes it proposed last summer to tighten its 2004 rule,known as Regulation SHO. Although the comment period closed inmid-September, the SEC said a new, 30-day extension is warranted inlight of the "continuing public interest" in the matter and concernsraised by a handful of groups and individuals who complained the agencyhad not issued data it referenced when proposing the changes."There's really no reason why they should delay," U.S. Chamber ofCommerce chief operating officer David Chavern said in a telephoneinterview Thursday. "The things they're proposing make perfect sense."The proposed changes aimed to bolster the SEC's earlier efforts tocombat "naked" short sales. Unlike short sellers who borrow shares inhopes of replacing them later and profiting from a price decline, nakedshort sellers don't borrow shares they sell short, a practice somecompare to counterfeiting.Although Regulation SHO imposed new restrictions and stock deliveryrequirements, it contained an exception for options market makers andexcluded pre-existing failures to deliver stocks sold short. Cox told aHouse subcommittee Tuesday that the rule proved "inadequate" because ofthe so-called "grandfather" protections for prior delivery failures.Last July, faced with chronic failures to deliver certain stocksborrowed for short sales, the SEC proposed ending those protections.Eliminating the "grandfather loophole" and market maker exception are"no-brainers," according to Chavern, who urged the SEC to "move aheadexpeditiously with the reforms that they've proposed."The SEC said it is reopening the proposal for comment after releasingdata sought by the American Bar Association and others, including by CTCLLC, which specializes in options trading."We provided additional data because the commenters asked for it, and welook forward to considering their views," said SEC spokesman JohnNester.The SEC had previously referenced the data from the National Associationof Securities Dealers, but didn't release it because it contained"confidential, company-specific" findings. An edited version of the NASDfindings showed many of the stock-delivery failures over a 10-monthperiod in 2005 had pre-existing delivery failures and may have beenexempt under the "grandfather" treatment, while others appear to havebeen covered by the option market maker exemption.
Friday, March 30, 2007
SEC Criticized by US Chamber