Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Thursday, July 5, 2007

Naked Short Selling Draws Attention to Stock Depository

How serious a problem is naked short-selling, and what can be done about it?  The SEC recently tightened the rules about delivery of shares after a sale.  But several companies that say they are victims of short-selling campaigns to drive down their stock price have sued Deposit Trust & Clearing Corp., charging that the depository has enabled short sellers to maintain large open "failure to deliver" positions.  In one recent suit, the SEC backed DTCC while NASAA filed a brief in support of the company.  Many believe more disclosure about how the system works is the answer.  See WSJ, Blame the 'Stock Vault'.

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