(1888PressRelease)
August 27, 2008 - A source familiar with policy at Cornerstone Worldwide said that the Security and Exchange Commission’s (SEC) decision to extend the curb on short-selling of 19 financial stocks is undermining the market to protect those firms from the consequences of their own ineptitude.
The Cornerstone Worldwide source said that as naked short-selling has always been illegal and that the SEC had turned a blind eye to the practice for years, it was duplicitous to restrict the practice simply because banks were on the sharp end of it.
The extension sees the rule in effect through until Aug. 12 2008.
The SEC rule is part of an agency crackdown on possible market manipulation that some blame for steep declines in the shares of financial companies.
The emergency measure, that first took effect July 21 and will not be further extended, requires investors to borrow a stock before selling it short and to deliver the stock on the settlement date rather than short-sell the stock before actually taking delivery of it as the practice was widely blamed for steep declines in the prices of stocks in Lehman Brothers and Freddie Man and Fannie Mae.
The SEC said it would use the additional time to collect more data on the rule's impact and then start a rule-making aimed at providing additional protections against abusive naked short selling in the broader market. Cornerstone Worldwide are thought to believe that the SEC should have been enforcing the rule long before the current crisis that has claimed, among others, Bear Stearns.
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