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9 Apr 2009

CPIC Responds to SEC’s Proposed Curbs on Short-Selling

James Chanos, Chairman of the Coalition of Private Investment Companies, said in response to the SEC's five proposed rules put forward to curb short-selling, "Rebuilding investor confidence should be the primary objective of any new regulatory effort and it is not clear that today's proposals will meet that simple goal."

The SEC voted unanimously to seek public comments on all of the proposed rules intended to limit short-sales.

"Skeptics, independent research and critical analysis must continue to play a vibrant role for our markets to grow sustainably and with integrity." Chanos continued, "Short selling is integral to improving the efficiency of markets and enhancing market quality through narrower spreads, deeper liquidity, less volatility, and greater price discovery.

"In recent years, short-sellers have publicly warned the marketplace about the dangers at AIG, Lehman Brothers, and Enron, as well as sounding the alarm over the credit ratings agencies, non-bank subprime lenders, and credit insurers. Proposals to inhibit short-selling have the effect of limiting this vital market-based antidote to corporate fraud and speculative bubbles, and must be carefully weighed against the clear harm that comes from ill-conceived government intervention in basic market functions,” Chanos concluded.

CPIC is a coalition of private investment companies whose members and associates are diverse in both size and investment strategies.

1 comment:

Eric Newman said...

The SEC explicitly admitted yesterday morning that they have no evidence that short sellers played any role in the market decline.

I find this astounding. On September 22nd, the SEC implemented Form SH, where all large firms are required to report their short positions to the SEC on a weekly basis.

On September 22nd, the Dow was at 11,000. It fell to 6,500 in the next 6 months, or about 40%. So the SEC has data on all meaningful short positions over a 40% market decline, and they are still unable to find any evidence shorts are to blame.

And yet they still think the uptick rule, or a new version of it, is an important thing to spend time and money on.