SEC Proposes “Naked” Short Selling Anti-Fraud Rule

On March 17, the U.S. Securities and Exchange Commission (SEC) issued its formal proposal to adopt an anti-fraud rule under the Securities Exchange Act of 1934 (Exchange Act). The rule would address failures to deliver securities that have been associated with “naked” short selling. The SEC stated that the proposed rule is intended to highlight the liability of persons that deceive certain specified persons about their intention or ability to deliver securities in time for settlement, including persons that deceive their broker-dealer about their locate source or ownership of shares, and that fail to deliver securities by settlement date. Comments will be due to the SEC 60 days after the proposal is published in the Federal Register, which should occur by March 25.

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