For Release: June 23, 2004
Contact:
SIA Corporate Communications (202) 216-2000
SEC SHORT-SALE PILOT IS ‘THOUGHTFUL, PRUDENT’ APPROACH TO PHASING IN REFORMS TO BENEFIT INVESTORS
WASHINGTON, D.C., June 23, 2004 – Today’s decision by the Securities and Exchange Commission to launch a pilot program in which a group of stocks would be free of existing short-sale trading restrictions is a “thoughtful, prudent” approach to phasing in reforms to protect investors, the Securities Industry Association today said.
“We are pleased that the SEC plans to go forward with the pilot,” said Ann Vlcek, an SIA vice president and associate general counsel, referring to the commission’s unanimous decision to lift short-selling restrictions on the shares of 1,000 companies included in the Russell 3000 index. “The SEC chose a thoughtful approach. We have maintained that a pilot enables all market participants to evaluate the most appropriate short-selling program that protects investors’ interests and contributes to the markets’ important function of determining the value of securities.”
Vlcek said the industry welcomed the commission’s retention of the existing short-sale rules for the remaining companies that are not participating in the pilot, rather than implementing a new test to determine whether an investor could sell stocks short.
“Deferring a decision on changes in the existing trading rules until after the pilot results are evaluated is prudent,” Vlcek said. “Had the SEC approved its initial proposal to change the rule for the shares of those companies that are not pilot participants, investors and the industry would have confronted considerable costs in reprogramming trading systems to comply with rules that conceivably could change after the pilot evaluation.”
Under the rule adopted today, the pilot program will begin in about six months and involve one-third of the Russell 3000 stocks (as the index will be reconstituted this Friday). The selections will be based on the average trading volume for companies in the index, using every third stock. The commission plans to announce shortly the specific stocks in the pilot.
Vlcek said the association will be studying the specifics of the proposed pilot, along with other provisions of the short-sale rule dealing with “locate and delivery” requirements. “We outlined our concerns in a comment letter,” she said. “We need to examine the final rule when it is published to see if our concerns have been addressed.”
SIA’s comment letter is available on the association’s Web site: http://www.sia.com/2004_comment_letters/pdf/SEC01-30-04.pdf
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The Securities Industry Association brings together the shared interests of nearly 600 securities firms to accomplish common goals. SIA’s primary mission is to build and maintain public trust and confidence in the securities markets. At its core: Commitment to Clarity, a commitment to openness and understanding as the guiding principles for all interactions between investors and the firms that serve them. SIA members (including investment banks, broker-dealers, and mutual fund companies) are active in all U.S. and foreign markets and in all phases of corporate and public finance. The U.S. securities industry employs 790,600 individuals, and its personnel manage the accounts of nearly 93-million investors directly and indirectly through corporate, thrift, and pension plans. In 2003, the industry generated $213 billion in domestic revenue and an estimated $283 billion in global revenues.
