A day after it banned naked short selling, the Securities and Exchange Commission, in concert with the U.K. Financial Services Authority, took temporary emergency action to prohibit short selling in financial companies to shore up investor confidence. The U.K. FSA took similar action yesterday.

The Commission’s action, effective immediately, will apply to the securities of 799 financial companies.

SEC Chairman Christopher Cox said the emergency order “will restore equilibrium to markets.”

“This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury, and the Congress,” Cox said.

The SEC said it will continue to consider measures to address short selling concerns in other publicly traded companies.

The emergency action will terminate at 11:59 p.m. ET on Oct. 2. The SEC noted it may extend the order beyond 10 business days if it deems an extension necessary in the public interest and for the protection of investors, but won’t extend it for more than 30 calendar days in total duration.

Meanwhile, the SEC is also temporarily requiring that institutional money managers report their new short sales of certain publicly traded securities and are temporarily easing restrictions on the ability of securities issuers to re-purchase their securities.

Amid the chaos, the SEC also responded publicly to remarks made by Republican presidential candidate John McCain, who commented that Cox “has betrayed the public’s trust. If I were President today, I would fire him.”

“The best response to political jabs like this is simply to put your head down and not lose a step doing the best job you can possibly do on behalf of those you serve,” Cox said in a statement. “For my part, I plan to do just that. I leave the political campaigns to pursue their own course.”

Topics