Tuesday, March 17, 2009

Isakson Co-Sponsors Legislation to Force SEC to Reinstate Uptick Rule

Says Bill Will Impose Discipline, Allow Stock Market to Restore Itself

U.S. Senator Johnny Isakson, R-Ga., today announced that he is co-sponsoring legislation by Senator Ted Kaufman, D-Del., to require the Securities and Exchange Commission to reinstate the “uptick rule” in order to stabilize the financial markets and protect the American consumer from traders forcing down the price of a stock. Isakson has been calling for the SEC to reinstate the rule since last fall.

“Senator Kaufman has introduced a piece of legislation that is right for America, it is right for America's investors, and it is right for our stock market as it still languishes today somewhere down near what we hope is the bottom,” Isakson said during a speech on the Senate floor. “One way to ensure that bottom exists is to stop rewarding those who would feed off of it and instead reinstate good discipline that ensures good practices and allows the market to restore itself back to a good equilibrium.”

In his remarks, Isakson argued that the market deterioration was impacted by short sellers rushing to the market, shorting financial stocks and accelerating the decline of those values. Isakson believes the uptick rule should be reinstated to ensure that traders are not coming into the market to take advantage of these difficult economic times.

Last fall, Isakson contacted Chris Cox, then-chairman of the Securities and Exchange Commission, urging him to reinstate the uptick rule. Isakson has since spoken on the floor of the Senate calling for the SEC to reinstate the rule. On March 13, 2009, the SEC announced it will meet on April 8 to consider whether to propose short sale price test rules.

The legislation Isakson is co-sponsoring directs the SEC to write regulations within 60 days to end abusive short selling. These regulations must reinstate the substance of the uptick rule that prohibited short sales that are not made on an increase in the price of the stock as well as require exchanges and other trading venues to execute the trades of long sellers ahead of short sellers, all other things being equal.

With the concurrence of the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System, the bill also directs the SEC to prohibit short sales of the securities of any financial institution unless that trade is affected at a price (in minimum lots specified by the Commission) at least 5 cents higher than the immediately preceding transaction in such securities.

Additionally, the legislation directs the SEC to prohibit any person from selling securities short unless that person has at the time of the short sale a demonstrable legally enforceable right to deliver the securities at the required delivery date and require that all short sales settle on the same time frame employed for long sales of the same securities.
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