In a crisis, a regulator may reach for quick measures that pause certain behavior. Such steps may be less a fix than a way to buy time while larger decisions are made elsewhere.
The U.S. Securities and Exchange Commission announced that each of the emergency orders issued on Sept. 17 and Sept. 18, 2008, will be extended. For the temporary prohibition of short selling in financial companies, the release said the ban will expire at 11:59 p.m. ET on the third business day after enactment of the legislation, but in any case no later than 11:59 p.m. ET on Oct. 17, 2008.
A fixed window and a wait for legislation
The release explained the limits of the SEC's emergency authority, which it had used against abusive short selling. Under this authority, the Commission's actions are limited to up to 30 calendar days, and may not be extended.
In general terms, tying an emergency rule to the timing of separate legislation may shift some of the pressure from the regulator to lawmakers. A short, fixed window can limit how long a pause lasts, while a regulator may still look for other ways to keep parts of it in place.
One reading is that a deadline marks the edges of an intervention. A pause may not remove risk from a system; it may mostly change who has to act before the clock runs out.
Sources
- Statement of Securities and Exchange Commission Concerning Short Selling and Issuer Stock Repurchases - U.S. Securities and Exchange Commission, 2008-10-01
