The SEC Cracks Down On The Biggest Market Threat: Short Sellers On Twitter

By Ian Katz, Erik Schatzker

Bloomberg Business

U.S. regulators are reviewing whether to make short sellers step out of the shadows, as negative comments by research firms increasingly batter share prices.

“It’s a complex sort of landscape, but it is an issue that has our intense attention,” Securities and Exchange Commission Chair Mary Jo White said during an interview on Bloomberg Television on Tuesday in response to a question about whether the agency would consider rules requiring short-selling disclosures by investors.

The SEC requires hedge funds to report their long positions periodically, but it has no such rule for their short positions, or those that bet against stocks. In Europe, hedge funds have had to disclose individual shorts of as little as 0.2 percent of a company’s market value to their national regulator since 2012. They have to publicly disclose shorts that total 0.5 percent.

The SEC has faced calls from the New York Stock Exchange to force investors to identify the stocks they are short selling. In an Oct. 7 letter, the NYSE urged the regulator to “bring light to a less transparent and increasingly consequential corner of the securities market.”

In addition to short selling, investors have other means, including using derivatives, to bet against a stock.