WASHINGTON — Federal regulators on Wednesday took measures aimed at reining in aggressive forms of short selling that were blamed in part for the demise of Lehman Brothers and that some feared could be used against other vulnerable companies.
The Securities and Exchange Commission adopted rules it said would provide permanent protections against abusive “naked” short selling. Unlike the SEC’s temporary emergency ban this summer covering naked short selling in the stocks of mortgage-finance giants Fannie Mae and Freddie Mac and 17 large investment banks, the new rules apply to trading in the broader market.
The new rules remove an exception for market makers in options on stocks from rules restricting naked short selling and tighten anti-fraud regulations related to that activity.
Short sellers bet that a stock’s price will fall so that they can profit from it.
