Compliance Avenue

On February 24, 2010, the SEC announced the adoption of a new short selling price restriction rule, and the final text of the new rule was officially released on February 26.  The rule will amend Regulation SHO under the Securities Exchange Act of 1934 by adopting a short sale “circuit breaker” that will be triggered any time a stock experiences a price decline of at least 10% in one day.  Once triggered, short selling in the stock will only be permitted at prices above the current national best bid.

This post summarizes the basic elements of the new rule, which represents the first short sale price restriction adopted by the SEC since it eliminated the former “uptick rule” in 2007.

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According to the Associated Press, lawmakers in Connecticut, may be gearing up to pass hedge fund legislation in their state.  Last year, the state legislature failed to pass a bill which would have required hedge funds and private equity firms to disclose certain conflicts of interest.  Some state lawmakers are looking to use that bill as a starting point for new hedge fund legislation.

Hedge fund regulation on the federal seems to be stuck in the Senate right now.  Although the house has already passed their financial reform bill (which includes hedge fund registration), the Senate version seems to be stuck.  It looks like some Connecticut legislators have gotten fed up with the slow progress and may take their own steps towards regulation for hedge funds in the state.

The Massachusetts Office of Consumer Affairs and Business Regulation has issued Regulations, effective March 1, 2010, that will apply to any businesses (including advisory and asset management firms) who own or license personal information about a resident of the Commonwealth of Massachusetts (i.e, your customers or your employees).  The focus of the Regulations is to ensure better protection of that personal information.  You can view the Regulations here.

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As SEC chairman, Schapiro pledged to quickly pursue new limits on short selling. In April, just two months after she took the job, the agency unveiled a proposal to crack down on the practice.

But more than a year after Schapiro took office, the SEC has not yet written into the Wall Street rulebook the short-selling limits — or most of the other measures that the agency has proposed to more tightly regulate the financial system. According to the Washington Post, whether Schapiro can achieve more of her reform agenda will be a test of how much she can change the SEC, which gained a reputation as a weak Wall Street regulator in the years leading up to the financial crisis………

According to a report from the Financial Times, Paulson & Co, a hedge fund that made billions of dollars betting against subprime mortgages, has received a request for information from the Securities and Exchange Commission in connection with an investigation into complex securities at the heart of the financial crisis, according to people familiar with the matter. In the months prior to the real estate crash, which pre-empted the global economic volatility, the company made $15 billion from investments in subprime deals.

As discussed on Dealbreaker, reports say that Boston-based Loch Capital Management has been “hit hard” by redemptions since the friend, Steven Fortuna, of founders (and bros) Timothy and Todd McSweeney pleaded guilty to insider trading, and agreed to cooperate with the government. Reuters is reporting that neither brother has been implicated in the Galleon investigation, in the clubby world of Boston’s hedge fund community, speculation has been swirling around the firm.