SEC working on short-selling proposals: report

(Reuters) - The U.S. Securities and Exchange Commission is working to unveil a proposal next month that would permanently tighten existing rules for short selling, the New York Post said citing people in talks with the agency.

The sources told the paper the SEC's staff is considering the expansion of the temporary rule put in place last month to combat abusive short selling.

Another option being debated involves imposing fines on people who fail to deliver borrowed shares within the mandatory three-day period, the sources said.

Last month, the SEC imposed a temporary rule that requires investors to borrow stock before executing a short sale in 19 major Wall Street firms such as Citigroup and Lehman Brothers, as well as mortgage finance groups Freddie Mac and Fannie Mae.

Investors who bet on falling stock prices also have been required to deliver the securities by the settlement date.

The emergency rules, which expire later on Tuesday, were a part of a crackdown on possible market manipulation that some blame for steep declines in the shares of financial companies.

The SEC's new proposal is slated to be unveiled in mid September but could take months to finalize, the paper said.

The SEC was not immediately available for comment.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by David Holmes)