Alerts

SEC Votes to Repeal the "Tick" Test and to Amend Regulation SHO

June 14, 2007

On June 13, 2007, the Securities and Exchange Commission ("SEC") voted on several rules relating to short selling. Most significantly, the SEC voted to repeal Rule 10a-1 under the Securities Exchange Act of 1934 (commonly known as the "tick" test) and other price restrictions and to 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 voted to propose and to re-propose other related amendments to the short-selling rules. Rule 105 of Regulation M - governing short selling within five days of pricing of a public offering - was scheduled to be addressed by the SEC at its meeting but was deferred to the next meeting.