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Regulators jump on Rhino’s back

Equities

So short sellers are still the public bêtes noirs of the equity market. That would appear to be the message conveyed yet again in February and March as US regulators prepared to brief William Donaldson, the new head of the Securities and Exchange Commission, on some of their plans to sort out this particular trading strategy.

Donaldson: many are expecting
the new head of the SEC to crack
down on the activities of short
sellers but to do so may be
misguided



It coincided with the announcement from the SEC at the end of February that it had fined Rhino Advisors, an investment advisory firm, $1 million for spearheading what it dubbed a "death-spiral campaign" using short selling to drive down the shares of Sedona, a software company.


Blaming short sellers for the poor performance of the stock market is hardly new, but there doesn't appear to be any evidence that short selling by itself is as nefarious as its detractors claim.

For one thing, short sellers make up a very small part of the hedge fund world.


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