Securities Markets
SEC Issues Emergency Order to Deter Uncovered Short Sales in Certain Financial Institutions
What This Means
The SEC has issued an emergency order to deter naked short selling in the publicly traded securities of 19 specific financial services firms, including Fannie Mae and Freddie Mac (a list of the issuers is set forth below). Under the order, prior to effecting a short sale in any of the affected securities, a person must have borrowed or arranged to borrow the security, or otherwise have the security available to borrow in its inventory, and must deliver the security on the settlement date of the transaction. As such, the order extends the borrowing requirements beyond the usual “locate” requirement and requires short sellers to earmark shares for delivery under their short sales. >>> continued
FSA Proposes Extension of UK Major Shareholder Notification Requirements to Equity Contracts for Differences (Including Equity Swaps and Other Equity Derivatives)
What This Means
In the light of responses to its 2007 consultation paper on the disclosure of Contracts for Differences (CP07/20), the United Kingdom’s Financial Services Authority (FSA) has decided to implement a general disclosure regime for long equity Contract for Differences (CFD) positions, which will include long equity swap positions and other equity derivatives (FSA Policy Update 2 July 2008). The proposed rules contemplate that reporting will be required regardless of whether the holder has control over voting of the underlying shares or the right to receive or elect to receive physical settlement.
SEC Proposes Major Revisions to Rule 15a-6
What This Means
The Securities and Exchange Commission (SEC) recently proposed substantial amendments to Rule 15a-6 under the Securities Exchange Act of 1934 (Exchange Act), which provides conditional exemptions from broker-dealer registration for foreign entities involved in certain activities involving certain U.S. investors. The proposed amendments to Rule 15a-6 would expand the scope of certain of those exemptions, and would ease or eliminate some of existing restrictions on interactions between foreign broker-dealers and U.S. customers. Comments on the proposal are due to the SEC 60 days after the proposal is published in the Federal Register, which should be during this week (June 30). >>> continued
FINRA Issues Proposals on Rulebook Consolidation
What This Means
FINRA has issued four proposals to consolidate existing NASD and NYSE rules into a single rulebook. Comments on the proposals are due to FINRA by June 13, 2008. The proposals are preliminary—they still must be filed with and adopted by the SEC before they can take effect. However, these proposals represent the first formal steps toward creating a single rulebook for broker-dealers that are FINRA members, which was a main objective of last year’s consolidation of member regulatory functions into a single SRO. FINRA indicated that the creation of this single rulebook will be accomplished in phases, with substantial completion during the next year.