Recent SEC enforcement actions put spotlight on prohibited short selling

Stephen Wink (Partner, based at Latham & Watkins LLP, New York, New York, USA)
Christopher Clark (Partner, based at Latham & Watkins LLP, New York, New York, USA)
Stefan Paulovic (Associate, based at Latham & Watkins LLP, New York, New York, USA)
Kathleen Whipple (Associate, based at Latham & Watkins LLP, New York, New York, USA)

Journal of Investment Compliance

ISSN: 1528-5812

Publication date: 27 February 2014

Abstract

Purpose

To highlight recent enforcement actions by the SEC demonstrating the agency's increased focus on violations of Rule 105 of Regulation M and to provide guidance on how to avoid becoming the target of such an SEC action.

Design/methodology/approach

Describes the SEC's 23 recent enforcement actions against firms for violations of Rule 105, explains the conduct prohibited by Rule 105 as well as the exceptions to the Rule, and provides advice on how firms can avoid a Rule 105 related SEC enforcement action.

Findings

In light of the SEC's recently announced zero-tolerance policy and the fact that Rule 105 does not require intent on the part of the short seller to engage in a prohibited transaction, firms should provide training to their employees regarding Rule 105, develop and implement policies and procedures to ensure compliance with Rule 105, and enforce those policies and procedures.

Originality/value

Practical explanation and guidance by experienced financial services lawyers.

Keywords

Acknowledgements

© 2013 Latham & Watkins LLP The information contained in this publication should not be construed as legal advice. Should further analysis or explanation of the subject matter be required, please contact the lawyer with whom you normally consult.

Citation

Wink, S., Clark, C., Paulovic, S. and Whipple, K. (2014), "Recent SEC enforcement actions put spotlight on prohibited short selling", Journal of Investment Compliance, Vol. 15 No. 1, pp. 41-44. https://doi.org/10.1108/JOIC-01-2014-0006

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Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Authors

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