FACTBOX-US SEC short-selling rules issued this week
Sept 19 (Reuters) - The U.S. Securities and Exchange Commission has approved a series of rules this week, cracking down on abusive short-selling and temporarily banning short selling in the stocks of 799 financial companies.
Following are details on the rules, which were issued in response to turmoil in world markets and heavy selling pressure on the stocks of financial firms, pressure some have blamed on rampant short selling.
FRIDAY RULEMAKING
* Temporary ban prohibits short selling in the securities of 799 financial companies and is immediately effective.
* Ban will end after Oct 2. SEC may extend order beyond the 10 days, but the ban will not last longer than 30 days total.
* Ban includes a limited exception for certain bona fide market makers.
* Option market makers are exempted from the requirements through Friday when selling short as part of bona fide market making and hedging activities.
* SEC ban is similar to a ban by the UK Financial Services Authority, which on Thursday imposed a four-month ban on short selling of financial stocks.
* SEC temporarily requires institutional money managers to report new short sales of certain publicly traded securities.
* Disclosure requirement applies to money managers with accounts holding at least $100 million.
* Disclosure form SH will be publicly available and must be filed on the first business day following a week in which the money manager effected short sales.
* Money managers will have to report the number and value of securities sold short each day during the prior week. Will not have to report positions that constitute less than 0.25 percent of the company's outstanding stock, or positions that have a market value less than $1 million.
* SEC temporarily eases restrictions on companies' ability to repurchase their securities.
* The easing is designed to give companies more control over their liquidity and to give them more power to reduce volatility in their stocks.
WEDNESDAY RULEMAKING
* Requires short sellers and their broker-dealers to deliver securities by the close of business on the settlement date (three days after the transaction date).
* If a short sale violates the delivery requirement, the broker-dealer will be prohibited from any further short sales in that security unless shares are not only located but also pre-borrowed.
* The delivery rule was effective Sept. 18 with the SEC seeking comment on it for 30 days. The SEC plans further rulemaking at end of the comment period.
* SEC also eliminated an option market-maker exception and now requires them to abide by the three-day delivery requirement for short sales.
* Another rule makes clear that those who lie about their intention or ability to deliver securities in time for a short sale settlement are violating the law. (Reporting by Karey Wutkowski; Editing by Tim Dobbyn)
