U.S. SEC adopts permanent ban on “naked” short selling

July 28, 2009

WASHINGTON, July 27 (Reuters) – U.S. securities regulators made permanent a rule designed to clamp down on an abusive type of market activity known as naked short selling, the Securities and Exchange Commission said on Monday.

The SEC finalized a rule that requires investors to deliver their shares within three days of shorting the stock, or making a bearish bet on a stock.

The interim rule was due to expire at the end of July.

In a short sale, an investor borrows stock and sells it in the hope that its price will fall. If the price does drop, the seller profits by buying the stock back at the lower price.
(Reporting by Rachelle Younglai; Editing by Richard Chang)

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