In July, in response to concerns about the effects of naked short selling on the stocks of major financial institutions, the SEC issued an emergency order prohibiting the practice with respect to stock of 17 financial

institutions, including Fannie Mae, Freddie Mac, Lehman Brothers, Morgan Stanley, Goldman Sachs and Merrill

Lynch. The order expired on August 12, 2008, and the SEC indicated that it was considering permanent rulemaking. On September 17, 2008, following the government rescue of Fannie Mae and Freddie Mac, the failure of Lehman Brothers, sale of Merrill Lynch and bail-out of AIG, the SEC took emergency action and adopted three rules to prohibit naked short selling.

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