NEWS

In its September 30, 2009 comment letter to the Securities and Exchange Commission, the American Bar Association’s Business Law section reiterated its concerns that the regulator has failed to provide any data that would support the need for restraints on short selling.

“We write primarily to underscore a point made in our July Letter – that data concerning short sales, and in particular the effect of short sales on the market dislocations of 2008, is uniquely within the possession of the Commission. . . . [N]either the April Proposing Release nor the August Proposing Release explains whether or why the Commission believes those studies support any of its various regulatory proposals. Only the Commission has full access to data. … The release of such data may also provide an administrative record that would assist the Commission’s effort to support its rulemaking in the face of any potential legal challenge.”

The ABA pointed to a recent court decision that emphasized the importance of the SEC’s inclusion of empircal data to support its rule-making.

“We note that, after the submission of our July Letter, the U.S. Court of Appeals for the District of Columbia Circuit decided American Equity Inv. Life Ins. Co. v. SEC, No. 09-1021 (D.C. Cir., July 21, 2009). The Court held that while the Commission had legal authority to adopt Securities Act Rule 151A defining indexed annuities as securities, the Commission had not adequately considered the effects of the rule on efficiency, competition and capital formation. If a price rule is adopted, we respectfully suggest that the Commission consider the implications of that decision in preparing any adopting release.”