Short Selling Restrictions Gain Traction

Due to allegations that the stock price of several financial institutions involved in the current crisis were beaten down by short sellers, several jurisdictions have recently introduced greater curbs on short selling.

The U.S. Securities and Exchange Commission (SEC) has introduced temporary bans on short selling in securities of 799 financial companies (see this report on the Harvard Law School Corporate Governance Blog). Other jurisdictions such as the U.K., through its Financial Services Authority (FSA), and Australia have introduced restrictions on short selling (see this report on the Corporate Law and Governance Blog).

While these measures are desirable, there exists strong opinion in some quarters that these are too little, too late.

(For a previous discussion on the concept of short selling and how it affects stock markets, please see an earlier post on this Blog)

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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