Emergency Order Pursuant to Section 12(K)(2) of the Securities Exchange Act of 1934 Taking Temporary Action To Respond to Market Developments, 54875-54877 [E8-22166]
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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices
jlentini on PROD1PC65 with NOTICES
Issuer’’ (17 CFR 205.1–205.7). The
information collection embedded in the
rules is necessary to implement the
Standards of Professional Conduct for
Attorneys prescribed by the rule and
required by Section 307 of the SarbanesOxley Act of 2002 (15 U.S.C. 7245). The
rules impose an ‘‘up-the-ladder’’
reporting requirement when attorneys
appearing and practicing before the
Commission become aware of evidence
of a material violation by the issuer or
any officer, director, employee, or agent
of the issuer. An issuer may choose to
establish a qualified legal compliance
committee (‘‘QLCC’’) as an alternative
procedure for reporting evidence of a
material violation. In the rare cases in
which a majority of a QLCC has
concluded that an issuer did not act
appropriately, the information may be
communicated to the Commission. The
collection of information is, therefore,
an important component of the
Commission’s program to discourage
violations of the federal securities laws
and promote ethical behavior of
attorneys appearing and practicing
before the Commission.
The respondents to this collection of
information are attorneys who appear
and practice before the Commission
and, in certain cases, the issuer, and/or
officers, directors and committees of the
issuer. We believe that, in providing
quality representation to issuers,
attorneys report evidence of violations
to others within the issuer, including
the Chief Legal Officer, the Chief
Executive Officer, and, where necessary,
the directors. In addition, officers and
directors investigate evidence of
violations and report within the issuer
the results of the investigation and the
remedial steps they have taken or
sanctions they have imposed. Except as
discussed below, we therefore believe
that the reporting requirements imposed
by the rule are ‘‘usual and customary’’
activities that do not add to the burden
that would be imposed by the collection
of information.
Certain aspects of the collection of
information, however, may impose a
burden. For an issuer to establish a
QLCC, the QLCC must adopt written
procedures for the confidential receipt,
retention, and consideration of any
report of evidence of a material
violation. We estimate for purposes of
the PRA that there are approximately
16,611 issuers that are subject to the
rules.1 Of these, we estimate that
1 This estimate is based, in part, on the total
number of operating companies that filed annual
reports on Form 10–K, Form 10–KSB, Form 20–F,
or Form 40–F, during the 2008 fiscal year and an
estimate of the average number of issuers that may
have a registration statement filed under the
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16:54 Sep 22, 2008
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approximately five percent, or 831, have
established or will establish a QLCC.2
Establishing the written procedures
required by the rule should not impose
a significant burden. We assume that an
issuer would incur a greater burden in
the year that it first establishes the
procedures than in subsequent years, in
which the burden would be incurred in
updating, reviewing, or modifying the
procedures. For purposes of the PRA,
we assume that an issuer would spend
6 hours every three-year period on the
procedures. This would result in an
average burden of 2 hours per year.
Thus, we estimate for purposes of the
PRA that the total annual burden
imposed by the collection of
information would be 1,662 hours.
Assuming half of the burden hours will
be incurred by outside counsel at a rate
of $400 per hour would result in a cost
of $332,400.
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid OMB control
number.
Written comments are requested on:
(a) Whether the collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information has practical utility; (b) the
accuracy of the Commission’s estimate
of the burden[s] of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to Lewis W. Walker, Acting Director/
Chief Information Officer, Securities
and Exchange Commission, C/O Shirley
Martinson, 6432 General Green Way,
Alexandria, Virginia 22312; or send an
e-mail to: PRA_Mailbox@sec.gov.
Securities Act pending with the Commission at any
time (12,939). In addition, we estimate that
approximately 3,672 investment companies
currently file periodic reports on Form N–SAR.
2 Indications are that the 2005 estimate of the
percentage of issuers that would establish QLCCs
(10%) was high. Our adjusted estimate in the
percentage of QLCCs (5%) results in a reduced
burden estimate as compared to the previouslyapproved collection.
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54875
September 15, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22115 Filed 9–22–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Securities Exchange Act of 1934; Release
No. 34–58572/ September 17, 2008]
Emergency Order Pursuant to Section
12(K)(2) of the Securities Exchange Act
of 1934 Taking Temporary Action To
Respond to Market Developments
The Commission continues to be
concerned that there is a substantial
threat of sudden and excessive
fluctuations of securities prices and
disruption in the functioning of the
securities markets that could threaten
fair and orderly markets. As evidenced
by our recent publication of an
emergency order under Section 12(k) of
the Securities Exchange Act of 1934 (the
‘‘July Emergency Order’’),1 we are
concerned about the possible
unnecessary or artificial price
movements based on unfounded rumors
regarding the stability of financial
institutions and other issuers
exacerbated by ‘‘naked’’ short selling.
Our concerns, however, are no longer
limited to just the financial institutions
that were the subject of the July
Emergency Order. In addition, we have
become concerned that some persons
may take advantage of issuers that have
become temporarily weakened by
current market conditions to engage in
inappropriate short selling in the
securities of such issuers.
Given the importance of confidence in
our financial markets as a whole, we
have become concerned about sudden
and unexplained declines in the prices
of securities. Such price declines can
give rise to questions about the
underlying financial condition of an
issuer, which in turn can create a crisis
of confidence without a fundamental
underlying basis. This crisis of
confidence can impair the liquidity and
ultimate viability of an issuer, with
potentially broad market consequences.
As a result of these recent
developments, the Commission
concluded that there continues to exist
a substantial threat of sudden and
excessive fluctuations of securities
prices generally and disruption in the
functioning of the securities markets
that could threaten fair and orderly
markets. Based on this conclusion, the
1 See Exchange Act Release No. 58166 (July 15,
2008).
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54876
Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices
jlentini on PROD1PC65 with NOTICES
Commission is exercising its powers
under Section 12(k)(2) of the Securities
Exchange Act of 1934.2 Pursuant to
Section 12(k)(2), in appropriate
circumstances the Commission may
issue summarily an order to alter,
supplement, suspend, or impose
requirements or restrictions with respect
to matters or actions subject to
regulation by the Commission.
We have concluded that it is
necessary to impose enhanced delivery
requirements on sales of all equity
securities, by adding and making
immediately effective a temporary rule
to Regulation SHO, Rule 204T. The
temporary rule imposes a penalty on
any participant 3 of a registered clearing
agency,4 and any broker-dealer from
which it receives trades for clearance
and settlement, for having a fail to
deliver position at a registered clearing
agency in any equity security. In
addition, we have concluded it is
necessary to make immediately effective
amendments to Rule 203(b)(3) of
Regulation SHO that eliminate the
options market maker exception from
Regulation SHO’s close-out
requirement. We are also making
immediately effective Rule 10b–21, a
‘‘naked’’ short selling antifraud rule.5
We intend these enhanced delivery
requirements and the antifraud rule to
impose powerful disincentives to those
who might otherwise exacerbate
artificial price movements through
‘‘naked’’ short selling.
In addition, in these unusual and
extraordinary circumstances, we believe
such requirements are in the public
interest and for the protection of
investors to maintain fair and orderly
securities markets, and to prevent
substantial disruption in the securities
markets.
2 This finding of an ‘‘emergency’’ is solely for
purposes of Section 12(k)(2) of the Exchange Act
and is not intended to have any other effect or
meaning or to confer any right or impose any
obligation other than set forth in this Order.
3 The term ‘‘participant’’ has the same meaning as
in section 3(a)(24) of the Exchange Act. See 15
U.S.C. 78c(a)(24).
4 The term ‘‘registered clearing agency’’ means a
clearing agency, as defined in section 3(a)(23)(A) of
the Exchange Act, that is registered as such
pursuant to section 17A of the Exchange Act. See
15 U.S.C. 78c(a)(23)(A) and 78q–1, respectively.
5 Rule 204T, as set forth in this Order, applies
only to fails to deliver resulting from trades that
occur after this Order becomes effective. Rule
203(b)(3) of Regulation SHO, as amended by this
Order, continues to apply to fails to deliver that
occurred prior to the Order becoming effective. For
example, if a participant has a fail to deliver
position in a threshold security that has persisted
for six consecutive settlement days prior to the
effective date of this Order and the fail continues
to persist until the thirteenth settlement day, the
participant must still close out its position pursuant
to Rule 203(b)(3).
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Jkt 214001
This emergency requirement should
significantly reduce any possibility that
‘‘naked’’ short selling may contribute to
the disruption of markets in these
securities. We described in the releases
in which we proposed and adopted
Regulation SHO the bases for the
current delivery requirements
Regulation SHO imposes. We believe,
however, that the unusual
circumstances we now confront require
the enhanced requirements we are
imposing today.
It is ordered that, pursuant to our
Section 12(k)(2) powers, we are adding
§ 242.204T to read as follows:
§ 242.204T
Short Sales.
(a) A participant of a registered
clearing agency must deliver securities
to a registered clearing agency for
clearance and settlement on a long or
short sale in any equity security by
settlement date, or if a participant of a
registered clearing agency has a fail to
deliver position at a registered clearing
agency in any equity security for a long
or short sale transaction in that equity
security, the participant shall, by no
later than the beginning of regular
trading hours on the settlement day
following the settlement date,
immediately close out the fail to deliver
position by borrowing or purchasing
securities of like kind and quantity;
Provided, however:
(1) If a participant of a registered
clearing agency has a fail to deliver
position at a registered clearing agency
in any equity security and the
participant can demonstrate on its books
and records that such fail to deliver
position resulted from a long sale, the
participant shall by no later than the
beginning of regular trading hours on
the third consecutive settlement day
following the settlement date,
immediately close out the fail to deliver
position by purchasing securities of like
kind and quantity; or
(2) If a participant of a registered
clearing agency has a fail to deliver
position at a registered clearing agency
in any equity security sold pursuant to
§ 230.144 of this chapter for thirty-five
consecutive settlement days after the
settlement date for a sale in that equity
security, the participant shall, by no
later than the beginning of regular
trading hours on the thirty-sixth
consecutive settlement day following
the settlement date for the transaction,
immediately close out the fail to deliver
position by purchasing securities of like
kind and quantity;
(b) If a participant of a registered
clearing agency has a fail to deliver
position in any equity security at a
registered clearing agency and does not
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Fmt 4703
Sfmt 4703
close out such fail to deliver position in
accordance with the requirements of
paragraph (a) of this section, the
participant and any broker or dealer
from which it receives trades for
clearance and settlement, including any
market maker that would otherwise be
entitled to rely on the exception
provided in § 242.203(b)(2)(iii), may not
accept a short sale order in the equity
security from another person, or effect a
short sale in the equity security for its
own account, to the extent that the
broker or dealer submits its short sales
to that participant for clearance and
settlement, without first borrowing the
security, or entering into a bona-fide
arrangement to borrow the security,
until the participant closes out the fail
to deliver position by purchasing
securities of like kind and quantity and
that purchase has cleared and settled at
a registered clearing agency;
(c) The participant must notify any
broker or dealer from which it receives
trades for clearance and settlement,
including any market maker that would
otherwise be entitled to rely on the
exception provided in
§ 242.203(b)(2)(iii):
(1) That the participant has a fail to
deliver position in an equity security at
a registered clearing agency that has not
been closed out in accordance with the
requirements of paragraph (a) of this
section; and
(2) When the purchase that the
participant has made to close out the
fail to deliver position has cleared and
settled at a registered clearing agency;
and
(d) Definitions: (1) For purposes of
this section, the term settlement date
shall mean the business day on which
delivery of a security and payment of
money is to be made through the
facilities of a registered clearing agency
in connection with the sale of a security.
(2) For purposes of this section, the
term regular trading hours has the same
meaning as in Rule 600(b)(64) of
Regulation NMS (17 CFR 242.600(b)(64).
It is further ordered that, pursuant to
our Section 12(k)(2) powers,
§ 242.203(b)(3)(iii) of Regulation SHO is
amended by revising paragraphs
(b)(3)(iii) and (b)(3)(v) to read as follows:
(iii) Provided, however, that a
participant of a registered clearing
agency that has a fail to deliver position
at a registered clearing agency in a
threshold security on the effective date
of this amendment and which, prior to
the effective date of this amendment,
had been previously excepted from the
close-out requirement in paragraph
(b)(3) of this section (i.e., because the
participant of a registered clearing
agency had a fail to deliver position in
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Federal Register / Vol. 73, No. 185 / Tuesday, September 23, 2008 / Notices
the threshold security that is attributed
to short sales effected by a registered
options market maker to establish or
maintain a hedge on options positions
that were created before the security
became a threshold security), shall
immediately close out that fail to deliver
position, including any adjustments to
the fail to deliver position, within 35
consecutive settlement days of the
effective date of this amendment by
purchasing securities of like kind and
quantity;
*
*
*
*
*
(v) If a participant of a registered
clearing agency entitled to rely on the
35 consecutive settlement day close-out
requirement contained in paragraph
(b)(3)(i), (b)(3)(ii), or (b)(3)(iii) of this
section has a fail to deliver position at
a registered clearing agency in the
threshold security for 35 consecutive
settlement days from the effective date
of the amendment, the participant and
any broker or dealer for which it clears
transactions, including any market
maker, that would otherwise be entitled
to rely on the exception provided in
paragraph (b)(2)(iii) of this section, may
not accept a short sale order in the
threshold security from another person,
or effect a short sale in the threshold
security for its own account, without
borrowing the security or entering into
a bona-fide arrangement to borrow the
security, until the participant closes out
the fail to deliver position by
purchasing securities of like kind and
quantity;
It is further ordered that, pursuant to
our Section 12(k)(2) powers, we are
adding § 240.10b–21 to read as follows:
jlentini on PROD1PC65 with NOTICES
§ 240.10b–21 Deception in connection with
a seller’s ability or intent to deliver
securities on the date delivery is due.
PRELIMINARY NOTE to rule 10b–21:
This rule is not intended to limit, or
restrict, the applicability of the general
antifraud provisions of the federal
securities laws, such as section 10(b) of
the Act and rule 10b–5 thereunder.
It shall also constitute a
‘‘manipulative or deceptive device or
contrivance’’ as used in section 10(b) of
this Act for any person to submit an
order to sell an equity security if such
person deceives a broker or dealer, a
participant of a registered clearing
agency, or a purchaser about its
intention or ability to deliver the
security on or before the settlement
date, and such person fails to deliver the
security on or before the settlement
date. For purposes of this section,
settlement date is as defined in
§ 242.204T of this chapter.
This Order shall be effective at 12:01
a.m. EDT on September 18, 2008, and
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16:54 Sep 22, 2008
Jkt 214001
shall terminate at 11:59 p.m. on October
1, 2008 unless further extended by the
Commission.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22166 Filed 9–22–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
FEDERAL REGISTER CITATION OF PREVIOUS
ANNOUNCEMENT: [to be published].
Closed Meeting.
100 F Street, NE., Washington,
STATUS:
PLACE:
DC.
periodic reports since the period ended
December 31, 2000.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
companies.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the
securities of the above-listed companies
is suspended for the period from 9:30
a.m. EDT on September 19, 2008,
through 11:59 p.m. EDT on October 2,
2008.
By the Commission.
J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E8–22373 Filed 9–19–08; 4:15 pm]
BILLING CODE 8010–01–P
DATE AND TIME OF PREVIOUSLY ANNOUNCED
MEETING: Thursday, September 18, 2008
at 1 p.m.
Cancellation of
Meeting.
The Closed Meeting scheduled for
Thursday, September 18, 2008 has been
cancelled.
For further information please contact
the Office of the Secretary at (202) 551–
5400.
CHANGE IN THE MEETING:
Dated: September 18, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–22195 Filed 9–22–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
In the Matter of Quality Resorts of
America, Inc., Quentra Networks, Inc.,
and Quokka Sports, Inc.; Order of
Suspension of Trading
September 19, 2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Quality
Resorts of America, Inc. because it has
not filed any periodic reports since the
period ended June 30, 1997.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Quentra
Networks, Inc. because it has not filed
any periodic reports since the period
ended September 30, 2000.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Quokka
Sports, Inc. because it has not filed any
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54877
Frm 00097
Fmt 4703
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SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
In the Matter of Ragen Corp. Rainwire
Partners, Inc., Rako Capital Corp.,
Ramtek Corp. (n/k/a Ramtek I Corp.),
Ranger Industries, Inc., RCS Holdings,
Inc., and Recycling Industries, Inc.,
Respondents.; Order of Suspension of
Trading
September 19, 2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Ragen Corp.
because it has not filed any periodic
reports since the period ended June 30,
1993.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Rainwire
Partners, Inc. because it has not filed
any periodic reports since the period
ended March 31, 2003.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Rako
Capital Corp. because it has not filed
any periodic reports since the period
ended March 31, 2003.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Ramtek
Corp. (n/k/a Ramtek I Corp.) because it
has not filed any periodic reports since
April 2, 1993.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Ranger
Industries, Inc. because it has not filed
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]]>Agencies
[Federal Register Volume 73, Number 185 (Tuesday, September 23, 2008)]
[Notices]
[Pages 54875-54877]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-22166]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Securities Exchange Act of 1934; Release No. 34-58572/ September 17,
2008]
Emergency Order Pursuant to Section 12(K)(2) of the Securities
Exchange Act of 1934 Taking Temporary Action To Respond to Market
Developments
The Commission continues to be concerned that there is a
substantial threat of sudden and excessive fluctuations of securities
prices and disruption in the functioning of the securities markets that
could threaten fair and orderly markets. As evidenced by our recent
publication of an emergency order under Section 12(k) of the Securities
Exchange Act of 1934 (the ``July Emergency Order''),\1\ we are
concerned about the possible unnecessary or artificial price movements
based on unfounded rumors regarding the stability of financial
institutions and other issuers exacerbated by ``naked'' short selling.
Our concerns, however, are no longer limited to just the financial
institutions that were the subject of the July Emergency Order. In
addition, we have become concerned that some persons may take advantage
of issuers that have become temporarily weakened by current market
conditions to engage in inappropriate short selling in the securities
of such issuers.
---------------------------------------------------------------------------
\1\ See Exchange Act Release No. 58166 (July 15, 2008).
---------------------------------------------------------------------------
Given the importance of confidence in our financial markets as a
whole, we have become concerned about sudden and unexplained declines
in the prices of securities. Such price declines can give rise to
questions about the underlying financial condition of an issuer, which
in turn can create a crisis of confidence without a fundamental
underlying basis. This crisis of confidence can impair the liquidity
and ultimate viability of an issuer, with potentially broad market
consequences.
As a result of these recent developments, the Commission concluded
that there continues to exist a substantial threat of sudden and
excessive fluctuations of securities prices generally and disruption in
the functioning of the securities markets that could threaten fair and
orderly markets. Based on this conclusion, the
[[Page 54876]]
Commission is exercising its powers under Section 12(k)(2) of the
Securities Exchange Act of 1934.\2\ Pursuant to Section 12(k)(2), in
appropriate circumstances the Commission may issue summarily an order
to alter, supplement, suspend, or impose requirements or restrictions
with respect to matters or actions subject to regulation by the
Commission.
---------------------------------------------------------------------------
\2\ This finding of an ``emergency'' is solely for purposes of
Section 12(k)(2) of the Exchange Act and is not intended to have any
other effect or meaning or to confer any right or impose any
obligation other than set forth in this Order.
---------------------------------------------------------------------------
We have concluded that it is necessary to impose enhanced delivery
requirements on sales of all equity securities, by adding and making
immediately effective a temporary rule to Regulation SHO, Rule 204T.
The temporary rule imposes a penalty on any participant \3\ of a
registered clearing agency,\4\ and any broker-dealer from which it
receives trades for clearance and settlement, for having a fail to
deliver position at a registered clearing agency in any equity
security. In addition, we have concluded it is necessary to make
immediately effective amendments to Rule 203(b)(3) of Regulation SHO
that eliminate the options market maker exception from Regulation SHO's
close-out requirement. We are also making immediately effective Rule
10b-21, a ``naked'' short selling antifraud rule.\5\ We intend these
enhanced delivery requirements and the antifraud rule to impose
powerful disincentives to those who might otherwise exacerbate
artificial price movements through ``naked'' short selling.
---------------------------------------------------------------------------
\3\ The term ``participant'' has the same meaning as in section
3(a)(24) of the Exchange Act. See 15 U.S.C. 78c(a)(24).
\4\ The term ``registered clearing agency'' means a clearing
agency, as defined in section 3(a)(23)(A) of the Exchange Act, that
is registered as such pursuant to section 17A of the Exchange Act.
See 15 U.S.C. 78c(a)(23)(A) and 78q-1, respectively.
\5\ Rule 204T, as set forth in this Order, applies only to fails
to deliver resulting from trades that occur after this Order becomes
effective. Rule 203(b)(3) of Regulation SHO, as amended by this
Order, continues to apply to fails to deliver that occurred prior to
the Order becoming effective. For example, if a participant has a
fail to deliver position in a threshold security that has persisted
for six consecutive settlement days prior to the effective date of
this Order and the fail continues to persist until the thirteenth
settlement day, the participant must still close out its position
pursuant to Rule 203(b)(3).
---------------------------------------------------------------------------
In addition, in these unusual and extraordinary circumstances, we
believe such requirements are in the public interest and for the
protection of investors to maintain fair and orderly securities
markets, and to prevent substantial disruption in the securities
markets.
This emergency requirement should significantly reduce any
possibility that ``naked'' short selling may contribute to the
disruption of markets in these securities. We described in the releases
in which we proposed and adopted Regulation SHO the bases for the
current delivery requirements Regulation SHO imposes. We believe,
however, that the unusual circumstances we now confront require the
enhanced requirements we are imposing today.
It is ordered that, pursuant to our Section 12(k)(2) powers, we are
adding Sec. 242.204T to read as follows:
Sec. 242.204T Short Sales.
(a) A participant of a registered clearing agency must deliver
securities to a registered clearing agency for clearance and settlement
on a long or short sale in any equity security by settlement date, or
if a participant of a registered clearing agency has a fail to deliver
position at a registered clearing agency in any equity security for a
long or short sale transaction in that equity security, the participant
shall, by no later than the beginning of regular trading hours on the
settlement day following the settlement date, immediately close out the
fail to deliver position by borrowing or purchasing securities of like
kind and quantity; Provided, however:
(1) If a participant of a registered clearing agency has a fail to
deliver position at a registered clearing agency in any equity security
and the participant can demonstrate on its books and records that such
fail to deliver position resulted from a long sale, the participant
shall by no later than the beginning of regular trading hours on the
third consecutive settlement day following the settlement date,
immediately close out the fail to deliver position by purchasing
securities of like kind and quantity; or
(2) If a participant of a registered clearing agency has a fail to
deliver position at a registered clearing agency in any equity security
sold pursuant to Sec. 230.144 of this chapter for thirty-five
consecutive settlement days after the settlement date for a sale in
that equity security, the participant shall, by no later than the
beginning of regular trading hours on the thirty-sixth consecutive
settlement day following the settlement date for the transaction,
immediately close out the fail to deliver position by purchasing
securities of like kind and quantity;
(b) If a participant of a registered clearing agency has a fail to
deliver position in any equity security at a registered clearing agency
and does not close out such fail to deliver position in accordance with
the requirements of paragraph (a) of this section, the participant and
any broker or dealer from which it receives trades for clearance and
settlement, including any market maker that would otherwise be entitled
to rely on the exception provided in Sec. 242.203(b)(2)(iii), may not
accept a short sale order in the equity security from another person,
or effect a short sale in the equity security for its own account, to
the extent that the broker or dealer submits its short sales to that
participant for clearance and settlement, without first borrowing the
security, or entering into a bona-fide arrangement to borrow the
security, until the participant closes out the fail to deliver position
by purchasing securities of like kind and quantity and that purchase
has cleared and settled at a registered clearing agency;
(c) The participant must notify any broker or dealer from which it
receives trades for clearance and settlement, including any market
maker that would otherwise be entitled to rely on the exception
provided in Sec. 242.203(b)(2)(iii):
(1) That the participant has a fail to deliver position in an
equity security at a registered clearing agency that has not been
closed out in accordance with the requirements of paragraph (a) of this
section; and
(2) When the purchase that the participant has made to close out
the fail to deliver position has cleared and settled at a registered
clearing agency; and
(d) Definitions: (1) For purposes of this section, the term
settlement date shall mean the business day on which delivery of a
security and payment of money is to be made through the facilities of a
registered clearing agency in connection with the sale of a security.
(2) For purposes of this section, the term regular trading hours
has the same meaning as in Rule 600(b)(64) of Regulation NMS (17 CFR
242.600(b)(64).
It is further ordered that, pursuant to our Section 12(k)(2)
powers, Sec. 242.203(b)(3)(iii) of Regulation SHO is amended by
revising paragraphs (b)(3)(iii) and (b)(3)(v) to read as follows:
(iii) Provided, however, that a participant of a registered
clearing agency that has a fail to deliver position at a registered
clearing agency in a threshold security on the effective date of this
amendment and which, prior to the effective date of this amendment, had
been previously excepted from the close-out requirement in paragraph
(b)(3) of this section (i.e., because the participant of a registered
clearing agency had a fail to deliver position in
[[Page 54877]]
the threshold security that is attributed to short sales effected by a
registered options market maker to establish or maintain a hedge on
options positions that were created before the security became a
threshold security), shall immediately close out that fail to deliver
position, including any adjustments to the fail to deliver position,
within 35 consecutive settlement days of the effective date of this
amendment by purchasing securities of like kind and quantity;
* * * * *
(v) If a participant of a registered clearing agency entitled to
rely on the 35 consecutive settlement day close-out requirement
contained in paragraph (b)(3)(i), (b)(3)(ii), or (b)(3)(iii) of this
section has a fail to deliver position at a registered clearing agency
in the threshold security for 35 consecutive settlement days from the
effective date of the amendment, the participant and any broker or
dealer for which it clears transactions, including any market maker,
that would otherwise be entitled to rely on the exception provided in
paragraph (b)(2)(iii) of this section, may not accept a short sale
order in the threshold security from another person, or effect a short
sale in the threshold security for its own account, without borrowing
the security or entering into a bona-fide arrangement to borrow the
security, until the participant closes out the fail to deliver position
by purchasing securities of like kind and quantity;
It is further ordered that, pursuant to our Section 12(k)(2)
powers, we are adding Sec. 240.10b-21 to read as follows:
Sec. 240.10b-21 Deception in connection with a seller's ability or
intent to deliver securities on the date delivery is due.
PRELIMINARY NOTE to rule 10b-21: This rule is not intended to
limit, or restrict, the applicability of the general antifraud
provisions of the federal securities laws, such as section 10(b) of the
Act and rule 10b-5 thereunder.
It shall also constitute a ``manipulative or deceptive device or
contrivance'' as used in section 10(b) of this Act for any person to
submit an order to sell an equity security if such person deceives a
broker or dealer, a participant of a registered clearing agency, or a
purchaser about its intention or ability to deliver the security on or
before the settlement date, and such person fails to deliver the
security on or before the settlement date. For purposes of this
section, settlement date is as defined in Sec. 242.204T of this
chapter.
This Order shall be effective at 12:01 a.m. EDT on September 18,
2008, and shall terminate at 11:59 p.m. on October 1, 2008 unless
further extended by the Commission.
By the Commission.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-22166 Filed 9-22-08; 8:45 am]
BILLING CODE 8010-01-P
