...thunders Wachtell Lipton. After failing to convince the SEC to reinstate the Uptick Rule, Wachtell has taken its fight to the media. The full text of a memo excoriating Chairman Cox for not reinstating the rule was posted today on the New York Times DealBook blog.
Former rule 10a-1, better known as the Uptick Rule, was adopted by the SEC in 1938 because "The preponderance of available evidence points to the conclusion that in a declining market certain types of short sales are seriously destructive of stability" (Release No. 34-1548, 1938 WL 32911). 10a-1 made short sellers buy at market price or above. It was intended to prevent a "bear raid" where short sellers pile on a falling stock by betting that it will continue to fall - like what happened to Lehman.
Unlike the baroquely condemned Consolidated Supervised Entity program, which wasn't his fault, the repeal of 10a-1 can be laid at SEC Chairman Cox's door. Soon after his appointment he speechified against it and started a "pilot program" to see how we'd manage without it. His curiosity satisfied, he repealed 10a-1 in 2007 (Release No 34-55970, 2007 WL 1880054).
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