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SEC Moves To Restrict Short Selling

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The U.S. Securities and Exchange Commission is prohibiting individuals and entities other than “bona fide market makers” from shorting hundreds of financial companies, including the parents of many life insurers, from now until 11:59 p.m. EDT Oct. 2.

In July, the SEC published a much shorter short-selling restriction list that included Allianz S.E., Munich, Germany.

The July list also included companies, such as Lehman Brothers Holdings Inc., New York and Federal National Mortgage Association, Washington, which ended up collapsing despite the SEC restrictions on selling their shares short.

The SEC acted in July to prevent “unfounded rumors” from destabilizing financial institutions, SEC officials write in the introduction to the new emergency short-selling order.

“Recent market conditions have made us concerned that short selling in the securities of a wider range of financial institutions may be causing sudden and excessive fluctuations of the prices of such securities in such a manner so as to threaten fair and orderly markets,” officials write.

SEC officials say the recent decreases in stock prices may “create a crisis of confidence, without a fundamental underlying basis.”

The SEC is including an exception for market makers, as it did in the July short-selling order.

“We believe this narrow exception is necessary because such market makers may need to facilitate customer orders in a fast-moving environment without possible delays associated with complying with the requirements of this order,” officials write.

The market maker exception includes block positioners as well as registered market makers.

Some investors on Yahoo message boards have been talking about getting around the short-selling restrictions by using exchange-traded funds that short financial stocks.

But ProShares, Bethesda, Md., the company that runs the Short Financials ProShares and UltraShort Financials ProShares ETFs, says the funds will not be accepting orders to create shares until further notice.

“The shares of these ProShares are expected to trade in the financial markets today, but may trade at prices that are not in line with their intraday indicative values,” ProShares says.


Here are the names of the insurance holding companies on the latest short-selling restriction list, which includes all of the publicly traded banks, insurers and securities firms that the SEC could identify:

- Aflac Inc., Columbus, Ga.

- AEGON N.V., The Hague, Netherlands.

- Aetna Inc., Hartford.

- American Equity Investment Life Holding Company, West Des Moines, Iowa.

- Amerigroup Corp., Virginia Beach, Va.

- American International Group Inc., New York.

- Assurant Inc., New York.

- American Independence Corp., New York.

- Ameriprise Financial Inc., Minneapolis.

- AXA UAP, Paris.

- Berkshire Hathaway Inc., Omaha, Neb.

- CIGNA Corp., Philadelphia.

- Conseco Inc., Carmel, Ind.

- Coventry Healthcare Inc., Bethesda, Md.

- FBL Financial Group Inc., West Des Moines, Iowa.

- Genworth Financial Inc., Richmond, Va.

- Health Net Inc., Woodland Hills, Calif.

- Humana Inc., Louisville, Ky.

- Independence Holding Company, Stamford, Conn.

- Kansas City Life Insurance Company, Kansas City, Mo.

- Lincoln National Corp., Philadelphia.

- Manulife Financial Corp., Toronto.

- National Western Life Insurance Company, Austin, Texas.

- Nationwide Financial Services Inc., Columbus, Ohio.

- Phoenix Companies Inc., Hartford.

- Presidential Life Corp., Nyack, N.Y.

- Principal Financial Group Inc., Des Moines, Iowa.

- Prudential Financial Inc., Newark, N.J.

- Protective Life Corp., Birmingham, Ala.

- Reinsurance Group of America Inc., Chesterfield, Mo.

- StanCorp Financial Group Inc., Portland, Ore.

- Torchmark Corp., McKinney, Texas.

- UnitedHealth Group Inc., Minnetonka, Minn.

- Unum Group Corp., Chattanooga, Tenn.

- WellPoint Inc., Indianapolis.

- White Mountains Insurance Group Inc., White River Junction, Vt.


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