The Securities and Exchange Commission chairman spoke to Bloomberg Television on Tuesday, revealing her concerns over short sellers.
U.S. regulators are considering a move that would mean short sellers have to emerge from behind the veil of secrecy that currently cloaks their work. White expressed her concerns about negative comments from research firms that have increasingly affected share prices of late, in an interview with Bloomberg Televison.
SEC to examine short selling disclosure rules more closely
“It’s a complex sort of landscape, but it is an issue that has our intense attention,” said Mary Jo White during the interview, responding to a question about the potential for new rules governing short-selling disclosures by investors.
Although White refused to mention specific companies in her response, one example of the impact of criticism on share prices is drug-maker Mallinckrodt Plc. Shares in the company fell 17% on Monday following criticism on Twitter from Citron Research, a commentary site run by Andrew Left. Renowned short seller Left’s Citron Research also provoked a rout of Valeant Pharmaceuticals International Inc. last month.
Under existing rules hedge funds are required to report their long positions on a regular basis, but no rules govern their short positions. In contrast funds working in Europe have had to disclose shorts of over 0.2% of a company’s market value and up to regulators since 2012. Public disclosure is required for shorts that total 0.5%.
Pressure growing for new rules
“Short selling has a legitimate, positive purpose in the marketplace,” White said. “That’s very different, though, than if you manipulate by short selling.”
The New York Stock Exchange has also appealed to the SEC for new rules forcing investors to reveal which stocks they are short selling. A letter dated October 7 asked the SEC to “bring light to a less transparent and increasingly consequential corner of the securities market.”
At the same time it is important to recognize that short selling is one of many ways, including derivatives, that investors can bet against a particular stock.