Temporary Ban Against Short Selling

December 26, 1989 SEC-BED * MEMORANDUM CIRCULAR NO. 12-89 TO : The Manila & Makati Stock Exchanges Their Member Firms & All Securities Salesmen RE : Temporary Ban Against Short Selling Whereas, recent events have caused uncertainties that brought about highly unusual market conditions, which if allowed to happen again will result in irreparable damage to the securities market. cdlex Whereas, lately, the securities market experienced an unusually heavy volume of short selling. Whereas, in order to ease the selling pressure that causes market instability, there is a need to temporarily prohibit short selling during certain periods of uncertainty. Wherefore, the Securities and Exchange Commission, in the exercise of the powers vested in it by law, and pursuant to Sec. 27 (g) of the Rules and Regulations Governing Securities Exchanges and their Members, Brokers, Dealers, Salesmen and Customers, does hereby order that effective immediately, and until otherwise directed, all short selling of securities are hereby PROHIBITED. The Exchanges are hereby directed to closely monitor the market situation to determine when it has stabilized and accordingly, recommend to the Commission the lifting of the ban on short selling. (SGD.) ROSARIO N. LOPEZ Chairman MEMORANDUM FOR : The Commission FROM : STRD Brokers and Exchanges Department THRU : Director Eugenio E. Reyes RE : Temporary Ban Against Short Sale DATE : December 26, 1989 The recent events have caused uncertainties which brought about the present highly unusual market conditions which if left uncontrolled might result in irreparable damage to the stock market. llcd Under Sec. 27 (g) of the Rules and Regulations Governing Securities and Exchanges and Their Members, Brokers, Dealers, Salesmen and Customers. "A securities exchange may prohibit short selling in the exchange indefinitely or for such period of time as it may deem necessary, convenient or advisable for the protection of investors and the Commission may also prohibit short selling in any exchange as an emergency measure or whenever the same is necessary or appropriate in the interest or for the protection of the investors ." We are of the view that there exists a need for the immediate prohibition against short selling because if left unchecked, it might be abused and taken advantage of by unscrupulous investors. Wherefore, we respectfully recommend for the Commission to issue an Order temporarily prohibiting short selling. The Order may be lifted upon recommendation of the Exchange and if circumstances so warrant. Respectfully submitted: (SGD.) ELIZABETH C. MARTIN Chief, STRD NOTED: (SGD.) EUGENIO E. REYES Director