Publications

Changes to Regulation SHO

Fall 2007
Marc E. Elovitz
Investment Management Developments - Fall 2007

The summer of 2007 brought changes to the Securities and Exchange Commission’s (“SEC”) short-selling rules under Regulation SHO. Most significantly, the SEC eliminated Rule 10a-1 under the Securities Exchange Act of 1934 (commonly known as the “tick” test) and other price restrictions. Additionally, the SEC will eliminate the “grandfather” exception to Regulation SHO’s requirement that fail-to-deliver positions be closed out within 13 days of failure. The SEC also proposed or re-proposed other amendments related to the short-selling rules. The SHO amendments are largely technical in nature, designed to eliminate a small but persistent population of securities consistently found on the threshold securities list.