SEC Ponders Changes to Short-Selling Provision

Lehman talks spur the regulatory agency to consider greater enforcement of the short-selling rules.
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During emergency meetings over the weekend to decide the fate of investment banks

Lehman Brothers

(LEH)

and

Merrill Lynch

(MER)

,

Securities and Exchange Commission

head Christopher Cox reportedly told financial companies the government would soon issue new regulations on short-selling. The regulations could be announced as soon as this week, according to a report on

The Wall Street Journal's

Web site Monday.

The rules would be aimed at both brokers and traders who abuse short-selling, including brokers and traders who fail to account for stock available in short-sales. The new regulations would make it illegal for traders to misrepresent to their brokers the availability of stock available for short-selling and not delivering on it.

TheStreet.com's

Jim Cramer has long criticized the SEC for lax enforcement of short-selling rules. Cramer has called for the SEC to

reinstate the uptick rule

and crack down on naked short-selling.

Cramer: Fed and SEC Dropped the Ball

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However, the SEC has no plans to reinstitute the uptick rule. The SEC recognized the problem of potential manipulation and plans to create circuit-breakers to address aggressive shorting.

SEC spokesman, John Heine, declined to comment on the new rules.