Beyond short-selling: A look at SEC reform

Wednesday, April 08, 2009

Today the Securities and Exchange Commission will unveil several proposals aimed at restricting short-selling—a technique used by investors to profit from falling stock prices by selling at one price and then buying back at a lower price. While it has thus far been legal, it is widely considered underhanded. That may all change with the SEC's new rules. But there are many issues at the SEC that could also use revision, problems that go far beyond short-selling. The Takeaway is taking a broad look at SEC reform with John Coffee, a professor at Columbia Law School and director of that school’s Center on Corporate Governance.

"In periods of market stress, short sellers can create a self-fulfilling prophecy by putting the market under pressure and causing other shareholders to fear futher price declines."
—John coffee of Columbia Law School on short-selling

Guests:

John Coffee

Hosted by:

Femi Oke

Contributors:

Noel King

Comments [1]

Andy Donovan

Two points: 1) Short selling may have saved us from worse: if AIG and the investment banks had not been stopped when they were, they would only have dug a deeper hole, and converted more of the public’s assets into bonuses, before the inevitable crash. Who else was stopping them? Neither the regulators nor the industry were doing anything (except for the short sellers, that is), and the economists were silent. 2) When discussing possible regulation, please ask the question of whether, and to what extent, the repeal of Glass-Steagall fed into the current situation. And while you are about it, the role of the ratings companies in selling out to the likes of AIG, issuing undeserved AAA ratings on all sorts of risky ventures, needs a lot more scrutiny.

Apr. 08 2009 08:14 AM

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