Publisher:
 Simon Beckett
 
 ISSN:
 1758-0013 (print)
 1758-0021 (online)
 
 First published:
 October 2007
 
 

 



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Regulation of short sales in the United States: Recent SEC actions and future prospects

Annette Nazareth, Robert Colby and Zoe Maddox

 

Abstract:
The regulation of short sales by the Securities and Exchange Commission (SEC) in recent years has moved drastically from obsolete restrictions to limited restraints, and back to heightened regulation, as the SEC has struggled to respond to perceived abusive short selling and dramatic pressures on stock prices. This paper analyses the SEC’s actions and assesses future prospects. It does so by examining the function, benefits and controversy surrounding short selling, describes the recent historical regulation of short selling by the SEC and analyses the pending proposal to reinstitute a price test to restrict short sales.
 
Keywords:
short sales, Securities and Exchange Commission, regulation

 

Annette Nazareth is a member of the Financial Institutions Group of the Washington DC office of Davis Polk. She advises clients across a broad range of complex regulatory matters and transactions. Annette also works closely with Davis Polk’s SEC enforcement practice, counselling non-financial sector corporations which are subject to government regulatory and enforcement actions. From 2005–2008 Annette was a Commissioner at the Securities and Exchange Commission where she worked on numerous groundbreaking initiatives, including execution quality disclosure rules, implementation of equities decimal pricing, short sale reforms and modernisation of the national market system rules. Prior to this she served as Rapporteur for the Group of Thirty’s Report, The Structure of Financial Supervision: Approaches and Challenges in a Global Marketplace.

Robert Colby is counsel in the Washington DC office of Davis Polk. He advises on financial crisis issues and complex regulatory and compliance questions involving securities and derivatives for broker-dealers, markets, central counterparties and rating agencies. Before joining Davis Polk in 2009, Robert served as Deputy Director of the Securities and Exchange Commission’s Division of Trading and Markets, where he was responsible for the regulation and oversight of Securities firms, clearing organisations and the US securities markets. Previously, he was Chief Counsel of the Division and Chief of the Division’s Office of Market Structure.

Zoe Maddox received her BA from the University of Virginia, her Juris Doctor degree from the New York University School of Law and was admitted to the Bar in the State of New York. Zoe joined the London Office of Davis Polk as an Associate in 2005. Since 2008 she has been working in the Corporate Department of the Washington DC offices and is assigned to the Financial Institutions Group.

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