SEC Adopts Rule Allowing Temporary Ban on Short Sales During Share Price Declines

A deeply divided Securities and Exchange Commission voted 3-2 Feb. 24 to adopt a rule that would temporarily restrict short selling in a stock when its price falls more than 10 percent in one day.

The SEC, whose alternatives included market-wide short sale price tests that would be imposed on a permanent basis, ultimately opted for a compromise in the hope of preserving investor confidence in U.S. markets. However, that compromise includes almost $1 billion in compliance costs for broker-dealers and trading centers, who bear the onus of the new requirements, staff and observers said…

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