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SEC adopts Amendments to Rule 105 of Regulation M, including important exceptions for bona fide purchases and for separate accounts

SEC adopts Amendments to Rule 105 of Regulation M, including important exceptions for bona fide... Purpose – The purpose of this paper is to provide a detailed description of Amendments to Rule 105 of Regulation M adopted by the US Securities and Exchange Commission (the “SEC”) on June 20, 2007 Design/methodology/approach – Presents a general overview of short sales and the purpose of Regulation M, a rule that prohibits purchases and sales of securities during specified periods close in time to public offerings of securities; and describes the Amendments, including an expansion of the prohibition under the Rule from a prohibition on “covering” to a prohibition on purchases generally and including three exceptions that pertain to “bona fide” purchases, “separate accounts,” and investment companies. Findings – The Amendments are important because: they expand the scope of the Rule's basic prohibition; they were expanded in part because SEC perceived that circumvention of the Rule was persistent; they permit notable exceptions; and they were adopted close in time to other amendments to the regulation of short sales, including elimination of the price or “tick” tests. Originality/value – Expert guidance on a recent SEC ruling by experienced securities lawyers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Investment Compliance Emerald Publishing

SEC adopts Amendments to Rule 105 of Regulation M, including important exceptions for bona fide purchases and for separate accounts

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1528-5812
DOI
10.1108/15285810810859298
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to provide a detailed description of Amendments to Rule 105 of Regulation M adopted by the US Securities and Exchange Commission (the “SEC”) on June 20, 2007 Design/methodology/approach – Presents a general overview of short sales and the purpose of Regulation M, a rule that prohibits purchases and sales of securities during specified periods close in time to public offerings of securities; and describes the Amendments, including an expansion of the prohibition under the Rule from a prohibition on “covering” to a prohibition on purchases generally and including three exceptions that pertain to “bona fide” purchases, “separate accounts,” and investment companies. Findings – The Amendments are important because: they expand the scope of the Rule's basic prohibition; they were expanded in part because SEC perceived that circumvention of the Rule was persistent; they permit notable exceptions; and they were adopted close in time to other amendments to the regulation of short sales, including elimination of the price or “tick” tests. Originality/value – Expert guidance on a recent SEC ruling by experienced securities lawyers.

Journal

Journal of Investment Compliance – Emerald Publishing

Published: Mar 14, 2008

Keywords: Laws and legislation; United States of America; Securities markets

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