Shorting Into Offerings: Amended Rule 105

Law360, New York (September 13, 2007, 12:00 AM EDT) -- On August 6, 2007, the Securities and Exchange Commission (SEC or Commission) published amendments to Rule 105 of Regulation M to further limit short selling in connection with secondary and follow-on securities offerings.[1] The effective date of the amended rule is October 9, 2007.

Rule 105 is a prophylactic rule[2] designed to prevent manipulative short selling that may affect pricing in a secondary or follow-on securities offering and to facilitate pricing based on natural market forces.

Previously, Rule 105 only prohibited “covering” short sales effected during...
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