Advisories

SEC Proposes New Short Sale Rules

November 2003

At an open meeting on Wednesday, October 22, 2003, the Securities and Exchange Commission (SEC) voted to release for public comment, sweeping changes to the regulation of short sales. Proposed Regulation SHO under the Securities Exchange Act of 1934, as amended, would revise many of the current rules governing short sales, most notably replacing the current "tick rule" for exchange-listed securities and "bid test" for Nasdaq National Market System securities with a single, uniform rule requiring all short sales to be effected at a price at least one penny above the consolidated best bid. The proposal also incorporates provisions of existing self-regulatory organization "locate" rules into a uniform SEC rule applicable to all equity securities, wherever traded, and imposes additional requirements on securities with substantial fail-to-deliver positions.