SEC To Fight Naked Short Selling In Fannie, Freddie and Primary Dealers

July 16, 2008 7:10 AM EDT

Securities and Exchange Commission today issued an emergency order to enhance investor protections against "naked" short selling in the securities of Fannie Mae (NYSE: FNM), Freddie Mac (NYSE: FRE), and primary dealers at commercial and investment banks.

The SEC's order will require that anyone effecting a short sale in these securities arrange beforehand to borrow the securities and deliver them at settlement. The order will take effect at 12:01 a.m. ET on Monday, July 21. In addition to this emergency order, the SEC will undertake a rulemaking to address these issues across the entire market.

"The SEC's mission to protect investors, maintain orderly markets, and promote capital formation is more important now than it has ever been," said SEC Chairman Christopher Cox. "Today's Commission action aims to stop unlawful manipulation through 'naked' short selling that threatens the stability of financial institutions. We will continue our vigorous commitment to investors by working within the SEC and in close cooperation with our regulatory counterparts to promote the continued health and vibrancy of our markets."

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