Division of Trading and Market
Guidance Regarding Sale of Loaned But Recalled Securities

Question: Some market participants have read the Emergency Orders to say that if a person that has loaned a security to another person sells that security, and a bona fide recall is initiated within two business days, then the sale should be treated as "long" for purposes of the Commission's Emergency Orders. Is this a correct interpretation of the Emergency Orders?

Answer: Yes, we agree with this interpretation of the Emergency Orders. We confirm that, if a person that has loaned a security to another person sells the security and a bona fide recall is initiated within two business days after trade date, the person that has loaned the security is deemed to own the security for purposes of Rule 200(g)(1) and Rule 200(b) of Regulation SHO, and such sale will not be treated as a short sale for purposes of:

1. Form SH in the Order Requiring Institutional Money Managers to Report New Short Sales, Exchange Act Release 58591 (September 18, 2008), as amended, Exchange Act Release 58591a (September 21, 2008);  
   


2. the Order Halting Short Selling in Financial Stocks, Exchange Act Release No. 58592 (September 18, 2008), as amended, Exchange Act Release 58611 (September 21, 2008); and, 
   


3. Rule 204T in the Order to Protect Investors against "Naked" Short Selling Abuses, Exchange Act Release 58572 (September 17, 2008). 
   

For purposes of the above-referenced Emergency Orders, we confirm that a broker-dealer may mark such orders "long." In addition, a broker-dealer may mark such orders as "long" sales provided such marking is also in compliance with Rule 200(c) of Regulation SHO. Thus, the close-out requirement for long sales under Rule 204T would apply to sales of such securities.

http://www.sec.gov/divisions/marketreg/loanedsecuritiesfaq.htm