September 3, 2008
The SEC imposed an emergency rule on July 21 that required short sellers to pre-borrow stock in mortgage finance giants Fannie Mae (NYSE:FNM - News) and Freddie Mac
(NYSE:FRE - News) and 17 major Wall Street firms such as Goldman Sachs (NYSE:GS - News) before executing a short trade. The SEC's emergency rule was aimed at cracking down on illegal naked short selling, when an investor sells stock that has not yet been borrowed.
It is beyond common sense to think that the SEC would not extend this requirement to all stocks. For any investor to be allowed to short stocks that they have no legal form of ownership in ( ie. That they have not yet arranged to borrow) is nothing short of allowing and condoning fraud on all stockholders . This requirement should be applicable to all stocks, be enforced vigorously, and have significant financial fines and sanctions applied to all who are found in violation of this rule.