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