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November 20, 2008 11:50 AM
Wachtell: WTF, SEC?!?! Reinstate the Uptick Rule!
Posted by Brian Baxter
We here at The Am Law Daily have come to appreciate the missives from Wachtell, Lipton, Rosen & Katz that arrive in our inbox every so often. Today's memo, which urges, no implores, the SEC to reinstate the controversial Uptick Rule, is one of the firm's best in some time.
Penned by Wachtell executive committee cochairman Edward Herlihy and counsel Theodore Levine--a former associate director of the SEC's division of enforcement--the scathing memo of 11-20-08 begins with a bang.
With our economy plagued by "widespread manipulative short selling and bear raids" and millions of investors "losing their life savings and retirement assets," the "investing public is losing confidence in the integrity of our markets," write Herlihy and Levine.
For the past several months Wachtell has urged the regulatory agency to implement short-selling restrictions, starting with the Uptick Rule first implemented in 1938. With limited exceptions, the rule only allows short sales when stock prices are on the rise. The SEC scrapped the rule in June 2007, concluding that it was outdated and ineffective.
But Herlihy and Levine claim that current economic volatility requires a return to Depression-era regulations to address rampant "short-selling, bear raids, and the spreading of false rumors."
By not acting proactively, the Wachtell duo claim the SEC is abandoning its traditional leadership role during times of economic crisis. (Critics claim that making life harder on short sellers by reinstating the Uptick Rule only serves to weaken market mechanisms designed to ensure appropriate valuations and prevent fraud.)
And yet despite Wachtell's pleas and entreaties, the SEC remains silent on resurrecting the rule. Thus the wrath of Herlihy and Levine.
The two even use language befitting a James Bond film rather than a legal memo when encouraging SEC Chairman Christopher Cox to act immediately.
"There is no tomorrow," write Herlihy and Levine. "The failure to reinstate the Uptick Rule is not acceptable."
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The SEC has destroyed more wealth than Osama Bin Laden and Saddam Hussein combined with their pro-terrorist policies. These despicable fools' reign of terror can't end a moment too soon. Let their loathsome legacy begin immediately, send these clowns packing now.
Comment By allenjn - November 20, 2008 at 2:11 PM
It is the very charter of the SEC to protect investors and facilitate capital formation.The removal of this rule and subsequent volatility of the markets has now threatened the economic stability of our country and devastated market confidence. There should be legal recourse to regulators who are derelict in their responsibilities.
Comment By frannie - November 20, 2008 at 6:04 PM
Chris Cox needs to be FIRED, plain and simple, along with any other regulator who advocates maintaining the practices which have destroyed billions in investor capital.
Comment By SJ - November 25, 2008 at 11:40 AM