Investment Banking Disclosures Sec 2008 34 58572
SEC Adopts Interim Final Temporary Rule Enhancing Delivery Requirements on Sales of All Equity Securities to Protect Against Naked Short Selling Abuses and Adopts New Anti Fraud-Rule
Rule 204T of Regulation SHO
On October 14, 2008, the U.S. Securities and Exchange Commission ("SEC") adopted temporary Rule 204T of Regulation SHO (PDF) as an interim final temporary rule ("Interim Rule"). This Interim Rule extends until July 31, 2009, the requirements of the SEC's September 17, 2008 Emergency Order (PDF) (the "Order") requiring the delivery of equities sold long or short on settlement date.
What this means for you
In compliance with the terms of the Interim Rule, any fail to deliver position must be closed out by the opening of trading on T+4. While Credit Suisse will use its best efforts to minimize the impact of any fails, we may be required to purchase shares from another source to cover your position should you not deliver the necessary shares by settlement. Should the fail continue to exist past the opening of trading on T+4, the Interim Rule requires that shares be pre-borrowed prior to Credit Suisse accepting any short sales in that security from any client until the fail to deliver position is closed out. In such case, clients will be required to obtain a pre-borrow from Credit Suisse's Stock Loan Department prior to entering a short sale with us.
Rule 10b-21 Short Selling Anti-Fraud Rule
On October 14, 2008, the SEC adopted Rule 10b-21 (PDF) effective October 17, 2008 which targets fraudulent sellers. The new rule makes clear that those who misrepresent their intention or ability to deliver securities in time for settlement are violating the law when they fail to deliver.