SEC Orders Naked Fannie, Freddie Short Sellers To Borrow First

Jul 16 2008 | 1:15pm ET

Hedge funds looking to profit from the downturn in Fannie Mae and Freddie Mac shares may find it a little harder to do so.

The Securities and Exchange Commission has issued an emergency order to “enhance investor protections” against naked short selling in the securities of the U.S.’s largest backers of mortgages and primary dealers at commercial and investment banks, including embattled Lehman Brothers.

Specifically, the SEC is ordering hedge funds involved in short selling these securities to borrow and deliver them at settlement. The order will take effect on July 21 through July 29.

“The SEC's mission to protect investors, maintain orderly markets, and promote capital formation is more important now than it has ever been," said SEC Chairman Christopher Cox. "Today's Commission action aims to stop unlawful manipulation through 'naked' short selling that threatens the stability of financial institutions. We will continue our vigorous commitment to investors by working within the SEC and in close cooperation with our regulatory counterparts to promote the continued health and vibrancy of our markets.”


In Depth

Q&A: Decathlon Capital On Revenue-Based Alternative Lending

Oct 30 2017 | 3:49pm ET

The explosion in private credit activity since the end of the financial crisis is...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

CAIS: How Technology is Disrupting the Alternative Investment Industry

Nov 7 2017 | 5:35pm ET

If there’s one thing that alternative investment professionals can agree on, it...