SEC Sharpens Short Selling Rule's Teeth

Law360, New York (June 22, 2007, 12:00 AM EDT) -- In a controversial move and a major setback for hedge funds, the Securities and Exchange Commission unanimously voted Wednesday to amend a rule in order to prevent short sellers from manipulating markets and forcing offering prices into the ground.

Those amendments will close a loophole in Rule 105 of Regulation M, which was itself intended to curb abusive short selling tactics, and will block traders from participating in a stock offering during the five days after they've shorted the stock.

Before, a trader simply couldn't cover...
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