Opalesque Industry Update - Managed Funds Association (MFA) today issued the following statement in response to the Securities and Exchange Commission’s (SEC) adoption of amendments to the rules that govern short selling.|
“MFA appreciates the careful, deliberative process the SEC undertook in considering these difficult market issues. While MFA shares the SEC’s commitment to restoring investor confidence, we are disappointed that the short selling restrictions adopted today are not supported by empirical data. In particular, most market observers agree that price declines and decreased investor confidence during the financial crisis were caused by the sudden and drastic changes in economic fundamentals, including the perceived insolvency of certain companies, and not by any short selling activity.
MFA fully supports the SEC’s efforts to combat manipulative short selling and other market abuses, but those activities should not be confused with legitimate short selling. As recognized by the SEC, short selling is an essential method by which investors – including those managing institutional assets for pension funds and endowments – mitigate risk, provide needed liquidity to markets, and assert their view that the current market price of a security is overpriced relative to the company’s economic performance.
Economic analyses and independent studies demonstrate that restrictions on short selling impede these important functions and impose significantly greater transaction costs on investors.
MFA urges the SEC to carefully monitor and analyze the impact of the new restrictions on the functioning of equity markets, and commit to reevaluating the rules based on observable impacts on markets, investors, and capital formation. We will continue our dialogue with the SEC and are committed to working with the Commission to implement the new restrictions in a manner that is least disruptive to investors, markets, and the free flow of capital.
MFA looks forward to reviewing the specifics of the new rules and may have future comments.”
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