SEC backs down from short selling disclosure rule

Posted Oct 3rd 2008 10:45AM by Zac Bissonnette
Filed under: Good news, Law

Earlier this week I wrote about what a bad idea the SEC's new rule requiring short selling hedge funds to disclose their positions was:

Mandatory disclosure of short positions will expose fund managers to issuer retaliation, frivolous lawsuits and harassment. What's so ridiculous about this rule is that a short position in a stock does not represent ownership of a security, and other than subjecting short sellers to harassment, there is no reason to require that the positions be publicly disclosed.

The SEC failed miserably in its responsibility to protect investors, and now it's compounding that mistake by targeting the wrong enemy.

Happily, the SEC has since seen the light. Short sellers will now be required to disclose their positions to the SEC -- which is fine -- but will not be required to make those disclosures public. If you like PDF files, you can read the announcement here.

What's so hypocritical about this is that while press releases posted prominently on the SEC website were made available for the crackdown on naked short selling and mean trash-talking hedge fund managers, you have to do a bit more digging to find the new announcement that backtracks.

It just goes to show what many of us have been saying all along: the "crackdown" on short sellers was just pathetic grandstanding by an agency that failed miserably in its duty to protect investors from misleading statements by public companies.

Tags: Disclosure, Hedge Funds, HedgeFunds, inthenews, SEC, Short, SHort Selling, ShortSelling

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Reader Comments (Page 1 of 1)

10-03-2008 @ 11:45AM

Dave said...

Excellent.

Now, since all this piss and vinegar is about how 'dangerous it is in these markets' to have individual hedge fund short interests disclosed teh next logical step would be:

Short Interest Hedge Funds must cease becoming public activists (nuisances) to any company they have shorted. Any disapprovals must be kept secret for the safety of our markets. Long intest hedge funds can continue being the public activist because long interest hedge funds must already disclose positions above 5% to the public.

Short Interest Hedge Funds can no longer attend James Chanos annual conference down in Florida to discuss, as a group, target companies of short interest. To continue to do such would assist in a herd mentality that Jim claims can be harmful to a market. If short interests are to be kept secret for market integrity - they must be kept SECRET.

I find it most amusing that the concerns of Chanos about short interests are not in line with concerns he should have long all things considered equal. if a market is to be transparent, why aren't short sellers disclosing publicly their positions at least on a quarterly basis the same way long interest funds must disclose? What is it that makes Jim think he is so special?

10-03-2008 @ 1:13PM

JB said...

Dave

Are you one of them Naked Short and MOASS zeelots? Have you met that Byrne? He will probably throw in the towel now that it turn out that Shorting is not the problem. probably management thing like always saying.

10-03-2008 @ 1:27PM

Unknown said...

JB, you are sounding paranoid. I believe this was about short sale disclosures.

Do you disagree with my assessment? certainly if short sellers are worried about their proprietary information getting out there it seems logical that they keep quiet all the time and not just when it is convienient for them