WASHINGTON, D.C.—Dennis Kelleher, President, Co-founder, and CEO for Better Markets, issued the following statement in response to the SEC’s exemptive order extending by two years the compliance dates for rules governing short selling and securities lending:
“Investors, markets and policy makers suffer from having far too little information about the short selling activities of financial firms like hedge funds and securities lenders. That’s why the SEC adopted important rules to require the disclosure of such information, which would greatly benefit all investors. Unfortunately, consistent with the SEC’s shift away from investor protection to management protection, the SEC just extended the compliance dates for those key rules for two years. Best case, that means investors and markets will be deprived of key information for two years, but the worst case is most likely: this is nothing more than a thinly disguised attempt by the SEC to kill these rules. That’s likely because this is the second time the SEC has extended the compliance dates for these rules, and the SEC offers no legitimate reason why a further extension of two years is necessary before requiring compliance, as SEC Commissioner Crenshaw detailed.
“The SEC’s actions here are especially troubling as we reach the five-year anniversary of the GameStop trading frenzy next month. Short selling, and the securities lending which facilitates short selling, precipitated the trading frenzy surrounding GameStop and other meme stocks in January 2021. Retail investors ended up suffering large losses as a result of the trading frenzy. Any SEC serious about investor protection would have enacted and enforced these rules long ago.
“As we documented in our comment letters supporting the rules, a report into the GameStop saga said that the SEC’s lack of insight into and information about short sale activity impaired its ability to properly respond and protect investors, many of whom suffered grievous losses. The short selling and securities lending rules were designed to fix this lack of transparency and better protect investors and the integrity of the markets. The SEC’s action extending the compliance dates means investors are left unprotected and leaves the market susceptible to similar market disruptions and destabilizing events from short selling. This is an avoidable disaster that the SEC is making inevitable.”
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
