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SEC adopts Amendments to Rule 105 of Regulation M, including important exceptions for bona fide purchases and for separate accounts

Charles S. Gittleman (Counsel, Shearman & Sterling LLP, New York, New York, USA)
Russell D. Sacks (Counsel, Shearman & Sterling LLP, New York, New York, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Article publication date: 14 March 2008

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Abstract

Purpose

The purpose of this paper is to provide a detailed description of Amendments to Rule 105 of Regulation M adopted by the US Securities and Exchange Commission (the “SEC”) on June 20, 2007

Design/methodology/approach

Presents a general overview of short sales and the purpose of Regulation M, a rule that prohibits purchases and sales of securities during specified periods close in time to public offerings of securities; and describes the Amendments, including an expansion of the prohibition under the Rule from a prohibition on “covering” to a prohibition on purchases generally and including three exceptions that pertain to “bona fide” purchases, “separate accounts,” and investment companies.

Findings

The Amendments are important because: they expand the scope of the Rule's basic prohibition; they were expanded in part because SEC perceived that circumvention of the Rule was persistent; they permit notable exceptions; and they were adopted close in time to other amendments to the regulation of short sales, including elimination of the price or “tick” tests.

Originality/value

Expert guidance on a recent SEC ruling by experienced securities lawyers.

Keywords

Citation

Gittleman, C.S. and Sacks, R.D. (2008), "SEC adopts Amendments to Rule 105 of Regulation M, including important exceptions for bona fide purchases and for separate accounts", Journal of Investment Compliance, Vol. 9 No. 1, pp. 30-34. https://doi.org/10.1108/15285810810859298

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited