Category: Regulation SHO

Regulation SHO: The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued the alert after its examiners observed options trading strategies that appeared to evade certain requirements of the short-sale rule. The alert describes and warns of the strategies used by some customers, broker-dealers and clearing firms, summarizes related enforcement actions, and makes suggestions regarding practices found to be effective in detecting and preventing trading intended to evade Regulation SHO…

Apr192016

The U.S. Capital Markets Clearance And Settlement Process

ABA Journal’s 10th Annual Blawg 100

——————————————————————————————————

Within the world of securities there are many sectors and facets to explore and understand.  To be successful, a public company must have an active, liquid trading market.  Accordingly, the trading markets themselves, including the settlement and clearing process in the US markets, is an important fundamental area of knowledge that every public company, potential public company, and advisor needs to comprehend.  A basic understanding of the trading markets will help drive relationships with transfer agents, market makers, broker-dealers and financial public relations firms as well as provide the knowledge to improve relationships with shareholders.  In addition, small pooled funds such as venture and hedge funds and family offices that invest in public markets will benefit from an understanding of the process.

This blog provides a historical foundation and summary of the clearance and settlement processes for US equities markets.  In a future blog, I will drill down into specific trading, including short

Sep232014

SEC Filed Actions Against 19 Firms and One Individual Trader for Violation of Rule 105 of Regulation M

ABA Journal’s 10th Annual Blawg 100

——————————————————————————————————

On September 16, 2014, the SEC filed actions against 19 firms and one individual trade for short selling violations in advance of public stock offerings in violation of Rule 105 of Regulation M.  The SEC has actively enforced Regulation M since its enactment in 1996.   Regulation M is designed to prevent stock manipulation during public offerings and Rule 105 particularly prohibits short selling of stock within five business days of participating in an offering for the same stock.  That is, you cannot short stock and cover your short by buying the same stock from the underwriter in a public offering.  Rule 105 prevents downward pressure on a company’s stock price during the offering process.

The SEC’s current investigation found that 19 firms and one individual trader charged in these latest cases engaged in short selling of particular stocks shortly before they bought shares from an underwriter, broker, or dealer participating in a follow-on

Aug152013

SEC Issued Risk Alert on Options Trading Used to Evade Short Sale Requirements

On Friday August 9, 2013, the Securities and Exchange Commission issued a Risk Alert to help market participants detect and prevent options trading that circumvents an SEC short sale rule.

The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued the alert after its examiners observed options trading strategies that appeared to evade certain requirements of the short-sale rule.  The alert describes and warns of the strategies used by some customers, broker-dealers and clearing firms, summarizes related enforcement actions, and makes suggestions regarding practices found to be effective in detecting and preventing trading intended to evade Regulation SHO.

Regulation SHO tightened requirements for short sales, which involve the selling of securities not already owned, usually by the borrowing of securities. Short sellers